Oral Answers to Questions

Gary Streeter: I disagree with the Chairman of the Select Committee on which I serve, but I accept that there is a point to address about people tanking up on cheap supermarket booze at home before unleashing themselves on the streets. I agree that it would be wrong for a Government to set a minimum price for alcohol, but will she encourage the supermarkets, which talk an awful lot in our constituencies about their social responsibility to the community, to think of this issue as part of that responsibility? Perhaps, given our particular problems, they should be encouraged, voluntarily, to be a little more responsible.

Madeleine Moon: This weekend, a further five street pastors were commissioned in Bridgend. That brings the total to 46 individuals from 17 churches giving their time to support the police in tackling antisocial behaviour and inappropriate drinking, and helping people who are distressed out on the streets of Bridgend when, on a Friday or Saturday night, they have gone out for a social occasion. Is that not another way in which we can reclaim the streets for ordinary law-abiding people so that people can enjoy a night out without having to be intimidated and threatened?
	May I also advise my right hon. Friend that the street pastors are now not only covering that 10 until 4 in the morning slot, but going onto one of my estates and working from 6 until 8 with youngsters, which will also improve life on that estate?

Gordon Brown: I am sure the whole House will join me in sending our profound condolences to the family and friends of Corporal Lee Churcher, of the Royal Engineers, who died while serving in Iraq, and Corporal Marc Birch, Marine Damian Davies, Lance-Corporal Jamie Fellows and Sergeant John Manuel of the Royal Marines, who lost their lives in Afghanistan. This is a tragic loss. We owe them and all those who have lost their lives in the service of our country our gratitude for their service and sacrifice. As a House and as a nation, we will never forget them. As I saw in Afghanistan on Saturday, our troops are serving with great skill, great courage and enormous dedication. It can truly be said that Britain's armed forces are the best in the world, and we are immensely proud of all who serve in them.
	With permission, Mr. Speaker, I would like to make a statement on the European Council held last Thursday and Friday, and on my visits to Afghanistan, India and Pakistan this weekend. The European summit focused on two global challenges—economic recovery and climate change. I can report, first of all, that the Council agreed measures worth around 1.5 per cent. of European GDP—that is, around €200 billion—which will provide a fiscal stimulus for the European economy. This 1.5 per cent. fiscal boost is in addition to the work of the automatic stabilisers. The measures agreed included support for
	"increased public spending, judicious reductions in tax burdens and direct aid to households, especially those which are most vulnerable"—
	exactly the measures that Britain has already taken, just as France has announced a package of measures worth €26 billion, Spain measures worth €11 billion, and Germany a fiscal package worth €32 billion.
	Just as Europe came together in October and November to lead the recapitalisation of the banks, so too Europe has agreed unanimously co-ordinated action which will support employment and growth. The Council agreed that its action was in a
	"united, strong, rapid and decisive manner",
	and while committing to medium-term sustainable public finances, it agreed to
	"mobilise all the instruments available to it."
	By acting in a co-ordinated and concerted way, the impact on jobs in each country is much greater than if we acted on our own, and the action across Europe will be of help to Britain, where nearly 60 per cent. of our trade is with the rest of Europe. The co-ordinated European action includes a speeding up of public procurement, a continued and general
	"reduction in administrative burdens on business",
	and an additional €30 billion from the European Investment Bank to be invested in Britain and throughout Europe in the coming year.
	So the debate about the use of fiscal policy to stimulate our economy and to give direct support for families and businesses in Europe is resolved. Europe favours substantial fiscal stimulus alongside cuts in interest rates. I am confident that the new American Administration of President-elect Obama will also introduce a large fiscal stimulus. This European set of announcements is the answer to those who said that nothing could be done and that the recession must take its course, and who believe that fiscal policy has no role to play. Indeed, even at this time of difficulty, they believe that public spending should be cut.
	To back up the loan guarantee scheme, the export credits and the deferral of tax, today the Chancellor will announce new measures to speed up the resumption of lending to businesses and home owners, and the Minister for Housing will announce a £400 million package of measures which, building on our help with mortgages to avoid repossessions, will help up to 18,000 first-time buyers draw on the home shared equity scheme to get on their first rung on the housing ladder—real help to families and businesses now, possible only because we are prepared to make a fiscal stimulus in the economy.
	In advance of Copenhagen next year, the summit agreed a new energy and climate change policy supported by all member states. When it is approved by the European Parliament, as I believe it will be, the programme will put into European law four far-reaching commitments: a 20 per cent. cut in greenhouse gas emissions by 2020, which, as part of the right international agreement, we will raise to 30 per cent.; a target that 20 per cent. of the European Union's energy will come from renewables by 2020; a strengthened European Union emissions trading scheme with 100 per cent. auctioning of permits in the power sector, the introduction of auctioning for other sectors of the economy and help to ensure that businesses in international markets can adjust; and a financing mechanism to make potentially around €9 billion available for the commercial demonstration of carbon capture and storage.
	Carbon capture is a transformative technology that every major economy will need, to ensure that it can continue to use coal, oil and gas without contributing to climate change. These commitments make Europe the first continent to make legally binding the detailed policies required to set itself on a path to a low-carbon economy. They provide a clear signal to the rest of the world that an international agreement on climate change can be achieved in Copenhagen next year. This was matched by agreement at the United Nations talks in Poznan at the same time, where a framework for countering deforestation was agreed. Britain will make a contribution of £100 million to that from our environmental transformation fund for sustainable forestry activities in developing countries.
	At the European Council, agreement was also reached on measures to answer concerns expressed to us by Ireland. All countries were agreed that there could be no change or amendment to the Lisbon treaty and that we should proceed to ratification, with the Irish agreeing to hold a referendum within the next year. At the same time, to meet Irish concerns, it was agreed: that the Lisbon treaty, as we have always made clear, in no way affects the rights of member states to make taxation decisions; that the treaty in no way affects the individual defence policies of member states, including our obligations to NATO's and Ireland's traditional neutrality; and that because, as we have been clear, the charter of fundamental rights creates no new rights at a European Union level, the Irish constitution provisions on the right to life, education and family are not affected by its incorporation into the treaty—nor are they affected by the justice and home affairs provisions of the treaty from which Ireland has an opt-out. The Lisbon treaty allows for the Council, by a unanimous decision, to agree to ensure that each member state retains a Commissioner—and this, we stated, we would be prepared to agree to.
	The Council also made an important statement on the middle east process. The Council welcomed efforts to give renewed momentum to the Arab peace initiative and affirmed that the EU will do all it can, practically and politically, to support the peace process and to urge the new US Administration to make it a major priority in the new year.
	Let me turn to Afghanistan, India and Pakistan. I have already paid tribute to, and I reiterate, the service, sacrifice and dedication of our armed forces. Today, I can inform the House that the increased compensation payments have come into force—a doubling, for the most serious injuries, to a new maximum lump sum of £570,000 for armed forces personnel wounded in action or otherwise, an increase that means that around £10 million will be paid to 2,700 troops who have been awarded lump-sum payments.
	While in Afghanistan, I and the Chief of the Defence Staff met President Karzai and took stock of our strategy with commanders and senior officials. We saw at first hand the hard and dangerous work that the armed forces are doing in very arduous conditions, far from home. Our goals in Afghanistan are clear: to support democracy and confront terror at its source; to build the Afghan capability by training its army and police to spread the rule of law into empty spaces on the map which shelter terrorism, narcotics and other problems; in all this, to root out corruption, respect local ways of life and strengthen traditional Afghan structures; and to give Afghan people an economic stake in the future.
	Free and fair elections are an essential part of Afghans taking control of their own security and destiny. So as we approach the Afghan elections planned for next year, on top of the work that we are doing with NATO and the Afghan army to ensure security for those elections, we are pledging to contribute $10 million to help with voter registration. In return for this renewed commitment, and others, that we will make from Britain, I have asked for quicker progress on the decisions at the NATO summit on burden sharing, and I have asked President Karzai for leadership in tackling corruption. For our part, we are offering a multi-agency task force which we are ready to send immediately to tackle corruption.
	Five years on from the first free and fair elections Afghanistan has seen in decades, we should reflect on what has been achieved. As Governor Mangal of Helmand, whom I met on Saturday, said,
	"it has been a hard year for our brave police and soldiers, but it has been a much harder year for our enemies who have found through experience that they cannot defeat us."
	Today, with 5 million refugees returning to Afghanistan, 4 million more children in school, great improvements in health care, including massive reductions in child mortality, and the national income up 70 per cent., our task is to ensure that violence and insecurity do not threaten that progress.
	Security depends on proper burden sharing. In recent weeks we have had to respond to the threat from insurgents in the district of Nad-e Ali near the provincial capital of Helmand. The operation involves 1,800 troops, not just from Britain but from Denmark, the USA and Estonia. It is a model of burden sharing that we need to see replicated across the whole of Afghanistan. Forty-one countries are involved in the NATO mission, but the burden is not always shared equally. As the international community and the American President-elect contemplate strengthening our commitment to Afghanistan, it is vital that all members of the coalition contribute fairly. This will be a subject of the NATO meeting on 3 and 4 April.
	The second pillar of security in Afghanistan is enabling the Afghan people to take greater control of their own affairs by training thousands of Afghan soldiers and thousands of police. With our help, Governor Mangal is starting to work with tribal leaders, whom I met in Musa Qala—a place that only last year was in Taliban hands, but is now building basic services like roads, power and water, and new schools and hospitals, which are having a tangible impact on the lives of Afghan people. This is starting to bring to Helmand the wider progress that we have seen in other parts of Afghanistan. To reinforce this progress, and having been briefed on the decision by the British commander—as is his right—to call forward reserves to work with our allies and deploy them on a temporary basis in the campaign in central Helmand, the Defence Secretary and I have decided, on advice from the defence chiefs, to approve until August, including the period of preparation for the elections, an increase in the number of British troops deployed to Afghanistan from just over 8,000 to around 8,300.
	We, the Americans and the international community as a whole increasingly recognise that we cannot deal with Afghanistan in isolation from Pakistan. There is a chain of terror that links the mountains of Afghanistan and Pakistan right through to the streets of the UK and other countries around the world, and that chain of terror must be broken. On 27 November, the whole world learned that terrorists based in Pakistan can strike anywhere, when a murderous assault condemned by the whole world saw 12 terrorists kill 175 people in Mumbai, including British citizens. This weekend, I met Prime Minister Singh and President Zardari to discuss action that now has to be taken. I expressed my condolences to Dr. Singh, and through him to the Indian people, and assured him that the whole of Britain stands fully alongside India in its determination to see those responsible brought to justice.
	I pay tribute to the efforts in Pakistan to deny the federally administered tribal areas as a training ground for terrorism and for the insurgency in Afghanistan and for terrorism. Indeed, more than 100 Pakistani troops have died since July this year in that area. Plots hatched in the FATA have a direct impact on the UK: of the security services' top-priority terrorist investigations, three quarters have links to Pakistan. So our commitment to countering terrorism and the empty spaces that shelter terrorism, and to build local capacity in Pakistan to do so, must be just as just as strong in Pakistan as in Afghanistan. The time has come not for more words but for more action. We will offer our support to the democratically elected Government of Pakistan, but that Government must act rapidly and decisively against the terror networks based on their soil.
	Pakistan's own future depends on action against those within its borders who are bent on the destruction of its elected Government and Pakistan's relations with its neighbours. To make this effective, Britain will work with both India and Pakistan to continue building counter-terrorism capability. Yesterday, I was able to announce more help on bomb disposal capability, scanning devices and airport security, and help to draw up new laws and to set up counter-extremism centres. Our assistance programme to Pakistan is the most comprehensive we have with any country, and will now include a programme, initially worth £6 million, to tackle the causes of radicalisation.
	No matter how serious the other tasks we face, security is the first duty of Government. We will always maintain our vigilance against the evils of terrorism. I commend this statement to the House.

David Cameron: I join the Prime Minister in paying tribute to our servicemen Marine Damian Davies, Sergeant John Manuel, Corporal Marc Birch and Lance-Corporal Jamie Fellows, who were all killed in Afghanistan, and Corporal Lee Churcher, who was killed in Basra. It is particularly poignant talking about their families' tragic loss at this time of year, but it should remind us of the bravery our troops show every day of the year.
	Let me deal with the Prime Minister's visits first. On Afghanistan, one of the lessons of Iraq was that the Government must give clear and frank assessments of what is happening on the ground. Does he agree that there are real causes for concern? The Taliban are operating closer and closer to Kabul, the road network is increasingly unsafe, and the number of Taliban and their armaments appear to be growing rather than shrinking. Does he agree that as well as a realistic assessment of conditions, we need a realistic mission? Should it not focus predominantly on security and rooting out terrorist training, not on an unrealistic objective of completely transforming a society thousands of miles away?
	Clearly, our servicemen and women are doing a great job, but what about the others who are key to success? Can the Prime Minister tell us more about the representations he made to President Karzai, not just about fraud in his Government, but about drug dealing by those associated with it, and corruption by public officials?
	On troop numbers, the Petraeus review is vital and it would be helpful if the Prime Minister could tell us about our contribution to that review, but surely we should send more troops only if there is a proper political strategy to help to deliver security, if there is more effective burden sharing with our NATO allies and if there is a corresponding increase in vital equipment, especially Chinook helicopters and armoured vehicles.
	Just as important is progress in Pakistan. Does the Prime Minister agree that the British public will not understand why we are making sacrifices to prevent terrorist training camps from being established in Afghanistan if they are still operating across the border in Pakistan? He said that he received assurances from President Zardari about taking action, but what is the Prime Minister's assessment of the ability of the Pakistan army, and the Pakistan intelligence services, to deliver on the commitments that he was given? Did he raise those matters directly with the Pakistan chief of general staff, General Kayani?
	Turning to Mumbai, I know that the Prime Minister agrees that we must strengthen our relationship with India. Can he tell us more about the close co-operation we need between our security services? Clearly, this style of attack on a major city in an open society is a new tactic. Can the Prime Minister tell the House what the Government will do to address that threat here?
	Turning to the European Council, on climate change we support the so-called 20/20/20 package, but will the Prime Minister confirm that the UK target for renewables is actually lower than 20 per cent., at 15 per cent. of total energy consumption by 2020? Would he accept that this environmental agreement shows that it is possible for Europe to take important decisions on important issues without new treaties and without new constitutions? The Lisbon treaty, by the way, has just seven words on the environment; that is all that it has on the subject.
	On the Lisbon treaty— [ Interruption. ] Yes, I read it, actually—Europe's leaders had to make a big decision: do they respect the wishes of the people? The answer was a resounding "no". Just what is it with this Prime Minister and elections? An unelected Prime Minister wants to force the Irish people to vote twice because he did not like the result the first time, and he refuses to allow the British people to vote once because he is afraid that he would not like the result of that, either. Does he agree that one of the advantages of an early election here in Britain would be that the Lisbon treaty could be put to the people in a referendum, and we could let them decide?
	Turning to the economic package, the Prime Minister makes three claims. First, he says that Britain is well prepared. If that is true, can he tell us why the pound has fallen to another record low? Is he aware that this lunchtime, his Olympics Minister said that Britain is
	"facing a recession deeper than any that we have known, almost certainly"?
	So is it not clear that we are not well prepared?
	Secondly, the Prime Minister says that those in the EU all agreed with him that every country should take part in the same sort of fiscal stimulus, regardless of their situation. So why does the European Commission statement for the Council state:
	"It is clear that not all Member States are in the same position.
	Those that took advantage of the good times to achieve more sustainable public finance positions... have more room for manoeuvre now."
	The Prime Minister did not read that out. It continues:
	"For those Member States, in particular those outside the euro area, which are facing significant imbalances, budgetary policy should essentially aim at correcting such imbalances."
	In other words, "If you're in a hole like the one the Prime Minister has put us into, stop digging."
	Thirdly, the Prime Minister said that he is setting the agenda with his particular measures—he is leafing through his papers to try to find them. Let us take VAT. The French Finance Minister said:
	"As far as we're concerned...we're not certain that when prices go down, a VAT reduction is that effective."
	The German Social Democrat budget spokesman said that the cut in VAT was counter-productive.
	That brings me to the Germans. I note that the Prime Minister did not really mention them—or perhaps he did once, but he thinks he got away with it. Is not it true that the German Finance Minister—another Social Democrat, by the way—has completely blown the Prime Minister's credibility out of the water? He described his approach as "crass" and mistaken. He criticised Britain's debt, which he believes will
	"take a whole generation to work off."
	In response, the Prime Minister claims that Germany's fiscal expansion backs up his own plans. However, Germany went into the downturn with a budget surplus; it fixed the roof when the sun was shining. In contrast, the Prime Minister led Britain into the downturn with the largest budget deficit in the industrialised world. Next, he claimed that this was all to do with internal German politics, but has not that claim been shattered, too? The Christian Democrats' budget spokesman said that the German Finance Minister's comments
	"have nothing whatsoever to do with internal German politics... the tremendous amount of debt being offered by Britain shows a complete failure of Labour policy".
	The Prime Minister is always telling us that he wants a consensus. He certainly got one in Germany: they all think that he has got it wrong.
	With the EU Council in mind, will the Prime Minister act to deal with what the Governor of the Bank of England says is the most pressing challenge: getting banks lending again? Will he adopt our proposal for a national loan guarantee scheme? I have the draft Bill here. Will he support it, so that we can get business trading and Britain out of the recession? Instead of dreaming about saving the world, when will the Prime Minister start saving businesses here in Britain?

Nicholas Clegg: Mr. Speaker, may I add my expressions of sympathy and condolence to the family and friends of Lance-Corporal Steven Fellows, Corporal Marc Birch, Sergeant John Manuel and Marine Damian Davies, who tragically lost their lives in Afghanistan, and to the family and friends of Lee Churcher, who, sadly, died in Iraq? We all owe them a huge debt for their service and sacrifice.
	Like so many European Union summits before it, last week's summit was stronger on words than action, richer in promises than in delivery. I welcome the summit proposals for a fiscal stimulus to boost the economy, in the shape of tax cuts and public investment. The question, then, is: why is the Prime Minister not properly practising here at home what he has preached in the European Union? Instead of having his short-term VAT cut, why will he not make the big, permanent, fair tax cuts for ordinary families that were called for at the European summit?
	Instead of wasting extra borrowed money on that VAT cut, why will the Prime Minister not invest in green infrastructure for Britain's future, creating green jobs and green growth, as were also called for at the summit? Does the Prime Minister not see that if he does not boost growth in that way—permanent tax cuts and green jobs—Britain will fall behind those countries in Europe that he has boasting about beating for about a decade? Already, in some places one can no longer buy a whole euro for a pound. Does the Prime Minister recognise that many eurozone economies could surge ahead of Britain, under his leadership, leaving us once again as the sick man of Europe?
	The summit was a wasted opportunity to defeat climate change. All those of us who want our children to have a planet worth living on will be disappointed that dirty industry has been given extra time to clean up its act. Will the Prime Minister tell us when the commitments will be reviewed, and when the loopholes for dirty industry will finally be closed?
	The Prime Minister also told us about his visits to Afghanistan, India and Pakistan. I welcome his words of commitment to those countries and support the temporary increase of troops until August in Afghanistan. Does he now recognise that any lasting peace in that country will have to come from a regional agreement—like the Dayton peace accords in the Balkans—and that we need to start talking now to China, Russia and Iran? Does he also agree that, if the local pragmatists in the Taliban are to be split from the national fundamentalists, the talks with the moderate Taliban that are going on in the shadows need to be brought out into the light and given new emphasis?
	Finally, I was disturbed to see that Zimbabwe warranted only a few words in the conclusions of the summit, even as millions face disease and starvation, and no words at all from the Prime Minister this afternoon. The Government have got their priorities wrong: instead of being tough on Mugabe, they are being tough on his victims, by refusing to allow Zimbabwean asylum seekers here to work, and, despite assurances to the contrary, by still deporting Zimbabweans to their fate—including Privilege Thalambo, who was arrested with her two daughters for deportation just last Friday.
	The Prime Minister talks with great passion about Africa, but he is not providing the right leadership. He has given the wrong leadership on the Congo. Why, instead of encouraging EU leaders to send EU troops, has he encouraged them not to send them? He has also given the wrong leadership on Zimbabwe. Why has he not pushed for international action by the United Nations under the new doctrine of responsibility to protect?
	Does the Prime Minister not agree that, on the economy, on climate change and on Africa, making the right promises is the easy bit, but delivering them is the real test?

Gordon Brown: The right hon. Gentleman's whole theme was that the summit was stronger on words than on action; if any group in the world is stronger on words than on action, it is the Liberal party.
	I shall answer individually each of the questions that the right hon. Gentleman has asked. On troops in Afghanistan, I am grateful for his support for the additional mission to ensure that central Helmand is free of the Taliban.
	On Zimbabwe, I disagree that we have done little; we have done a huge amount to try to get humanitarian aid to the people who are affected by cholera, to persuade the southern African states to take the necessary action, to bring this forward to the Security Council, as we are doing, and to ensure that the whole world understands the blood-stained regime that we are dealing with in Zimbabwe. We will continue our efforts to try to persuade African leaders to take a tougher stand on the issue.
	On the Congo, I think that the right hon. Gentleman realises that, in preference to rushing to deploy an EU force at the moment, the most important thing is to strengthen the UN force. It is to rise from 17,000 to 20,000, and we have put aside some money to help the recruiting of the additional troops for work in the Congo. By far the quickest and most effective way of getting help to people there, and of dealing with the incursions that are taking place, is to strengthen the numbers, the quality and the leadership of the UN force on the ground.
	On climate change, I also disagree with the right hon. Gentleman. There is a debate to be had about carbon leakage, and there is to be a rigorous examination of its impact. No action will be taken to exclude the non-power sectors of the economy from auctioning until that rigorous examination has been carried out. The proposals will then go back to the Council for further discussion within six months, so that we can be clear that carbon leakage is not being used as an excuse to escape responsibility for taking action on climate change. Our objectives of a 20 per cent. cut in emissions, of 100 per cent. power auctioning and of a €9 billion commitment to carbon capture and storage were all achieved at the summit, and, for all the difficulties that the right hon. Gentleman has raised about carbon leakage—a matter that has still to come back to be discussed in full later—there have been enormous advances that will put Europe in a position to take the lead in Copenhagen in securing a climate change agreement.
	I know that the right hon. Gentleman does not favour the VAT cuts that have taken place, but I believe that they are already making a difference, and I hope that he will support the increase in public spending that is taking place as a result of decisions that we have made. Not only has £5 billion already been allocated to small businesses, with a great deal more to come, but a £10 billion increase in the capital budget from last year to next year will enable us to proceed with our plans for roads, transport, schools and hospitals in a way that will employ more people. I hope that the Liberal party will continue to support that action, which is necessary to inject more capital spending into the economy at a time when it is most needed.
	The fact of the matter is that monetary policy has a transmission mechanism that is impaired, and we cannot rely totally on monetary policy. No other major country in the world is saying that monetary policy alone can do this work, apart from the people who represent the Conservative party at the moment. Fiscal policy is absolutely essential, especially at a time of low inflation and low interest rates: the case for using fiscal policy is even stronger then.
	It is unfortunate that the Conservatives have not learnt the basic lesson of the 1970s and 1980s that a recession is prolonged by a failure to invest and a failure to use capital spending. The Liberals and I are agreed on the need for capital investment. The Conservative party should go back to the drawing board and think again.

Gordon Brown: I should point out to my hon. Friend that our strategy is based on complementing the military intervention that is necessary to keep peace in Afghanistan and maintain democracy with other measures that will build up the confidence of the Afghan people so that they are enabled to govern themselves. That includes, as I have just said, training the Afghan forces and police, as well as building up local government, working with the tribes to create a means by which localities are properly governed and cleaning out corruption from the centre—on which I have pressed President Karzai, and why our multi-agency task force is going in. It also includes giving Afghan people a stake in their future—by helping them to become wheat farmers, for example, rather than farmers of drugs and narcotics—whether they are in villages, towns or in the countryside. That is our strategy for Afghanistan. It is necessary that we have the number of troops to deal with the Taliban, but it is also necessary that we train the Afghan army and police and that we invest in building the facilities that are necessary so that people have a stake in Afghanistan's future.

Richard Burden: In relation to matters discussed at the European Council, does the Prime Minister agree that one of the things that will be vital to long-term economic recovery is ensuring that strategically important industries can weather the current storm and prosper into the future? In that context, will he say a little more about efforts being made at European level in relation to the automotive industry, whose health is vital to many EU member states?

Crispin Blunt: The evidence is that the position of the international community, including the Karzai Government, in Afghanistan is becoming more difficult day by day. It is also evident that public support in the UK for our troops in Afghanistan is declining rather than increasing. The Prime Minister is conducting this important and much needed review of policy towards Afghanistan. Can the House of Commons have the opportunity to contribute to the review through at least a day, but preferably two days, of debate before it is completed?

Debate on the Address
	 — 
	[6th Day]

George Osborne: I beg to move an amendment, at the end of the Question to add:
	"but humbly regret that the Gracious Speech fails to deliver a clear direction for British economic policy, does not contain measures to assist in building a low debt and low tax economy, and lacks any radical action to unblock the credit channels of our banking system; note that many individuals have seen returns on their savings severely reduced as a result of the economic downturn and regret that the Government has no plans for emergency protection of pensioners with a suspension of annuity rules; further regret the absence of a clear strategy on value added tax; and further regret the absence of measures to avoid the United Kingdom undergoing the worst recession in the G7 next year.".
	Thanks to your decision, Mr. Speaker, to grant our request for an emergency debate, it has been three weeks since we last examined the Government's handling of the recession that is now engulfing our country. We were then told by the Chancellor from the Dispatch Box that the measures in the pre-Budget report would hasten the end of the recession by bolstering confidence at home and the credibility of British Government policy abroad.
	What has been the judgment in the last week alone on the Chancellor's claim? The pound has fallen against the euro, hitting a record low earlier today and demonstrating again the Prime Minister's maxim that a weak currency is a reflection of a weak economy and a weak Government. The loss of international credibility has sent the cost of insuring British Government debt higher than insuring the debt of those two homes of French fries, Belgium and McDonalds. An independent survey out today says that the drop in the VAT rate seems to have made little difference in lifting consumer confidence and encouraging consumers to spend. The head of Barclays bank says that despite the measures announced by the Government over the past few weeks, such as those on stamp duty, house prices will fall by at least as much next year as they have this year.
	This lunchtime, the Minister for the Olympics has contradicted every statement made by the Prime Minister and the Chancellor over the past six months by admitting, in her words, that Britain is facing a recession
	"deeper than any that we have known".
	So, what about all that talk about the 1980s and 1990s now? The Finance Minister of the world's third largest economy has described the Government's approach as "crass" and "breathtaking" and raising debt to a level that will take "a whole generation" to pay off. That is the problem with saving the world—sometimes the world answers back.
	The Chancellor and the Prime Minister tried to dismiss the German Finance Minister's comments—indeed, the Prime Minister again did so just a few minutes ago—as their being all to do with the internal politics of Germany. Mr. Steinbrück is a Social Democrat, and the Christian Democrats issued the statement:
	"Peer Steinbrück's comments have nothing whatsoever to do with internal German politics, as Prime Minister Brown has suggested."
	Indeed, one could feel the sense of schadenfreude after all those brusque encounters with our Prime Minister at ECOFIN meetings, when the spokesman continued:
	"After years of lecturing us on how we need to share in the gains of uncontrolled financial markets, the Labour politicians can't now expect us to share in its losses. The tremendous amount of debt being offered by Britain shows a complete failure of Labour policy."
	That is not a Conservative politician—it is not even a Liberal Democrat—but the spokesman of another Government.
	Of course, this debate should be about more than the mistakes that the Government made with their pre-Budget report, serious though they are; it is about the legislative programme for the coming year, so my hon. Friend the Member for Epsom and Ewell (Chris Grayling) will speak about the welfare reform and child poverty Bills. Let me make it clear to the Chancellor that our offer of co-operation to ensure that the Banking Bill, carried over from the previous Session, passes through Parliament by next February still holds, but we expect the powers we give the regulators to be enforced in the courts if necessary, as my right hon. Friend the Leader of the Opposition made clear today.
	I wish that today's debate was an opportunity to examine the Government's response to the Equitable Life scandal and the damning report from the parliamentary ombudsman. After all, only a couple of weeks ago the Prime Minister made an absolutely unambiguous promise at the Dispatch Box:
	"There will be a statement before the House rises at Christmas. I can say to the hon. Gentleman that that will be done."
	When Members on the Opposition Benches shouted out in disbelief, the Prime Minister said:
	"There will be a statement before the House rises this Christmas."—[ Official Report, 3 December 2008; Vol. 485, c. 38.]
	Indeed, that was followed up by a letter from the Economic Secretary to my hon. Friends the Members for Fareham (Mr. Hoban) and for Macclesfield (Sir Nicholas Winterton), saying that the Government would give their considered response to the ombudsman's report to the House shortly, and—in the Economic Secretary's own handwriting—"before the recess".
	Those were the promises made to Parliament—to Members of the House—yet now it seems that the promises are to be broken. Having waited months for the Government reply—indeed, they have had a draft report for well over a year—desperate policyholders will have to wait even longer. As the Public Administration Committee put it in a report today:
	"Justice further delayed will mean justice denied to even more people."
	Equitable Life policyholders have suffered enough: raising hopes and then dashing them before Christmas is a shabby way to treat people. It is time the Government said sorry and accepted the ombudsman's report. I suspect that the Chancellor will not do so today, but I am sure that he will be forced to in due course.
	Instead, we must focus our attention on the deepening recession into which the Government have led us, and what better place to start than by reminding the House what the Chancellor told us in the debate on the Queen's Speech a year ago? That debate was held many months after the August seizure of the credit markets. It took place long after the Chancellor had discovered from reading his  Financial Times that a credit crunch was happening. It was after the Northern Rock run and after warnings had come thick and fast about the downturn that lay ahead; in other words, when the Chancellor rose to speak in this debate a year ago there was absolutely no excuse for his not facing up to the economic realities, preparing the country for a forthcoming recession and readying the House for the difficult decisions that lay ahead. However, instead he told us that Britain
	"will grow the fastest of all the developed countries. Inflation is around target...The foundation for all those things is a strong and stable economy...That is why, as I have said time and again, we shall take no risks with stability."
	Britain was to grow faster than any other country and inflation was to be on target—it just shows what a complete fantasy world the Treasury was living in.
	To be fair to the Chancellor, he gave us the following warning, which turned out to be nothing short of prescient:
	"What risks stability is getting into a position of making promises that cannot be afforded. That will result either in increased taxes elsewhere or, more likely, increased borrowing, which puts pressure on interest rates. That is the last thing we need, especially at this time of international uncertainty."—[ Official Report, 14 November 2007; Vol. 467, c. 701.]
	A year ago, he said that increased borrowing was the "last thing we need", but it is the very first thing he proposed in the face of the recession.
	How did the Government move from the position a year ago, when the Chancellor boasted that he would take no risks with stability, and predicted that Britain's economy would grow the fastest of all developed economies, to today's position? Now, the prediction from almost every international body is that Britain's economy will contract the furthest of all developed countries in the world, and the Chancellor is taking enormous risks with stability—risks that mean increased taxes, increased borrowing, and pressure on long-term interest rates, as he warned us a year ago.
	The Government's answer is that it is all America's fault. That has become a kind of mantra for the Government, like something in a panto; I know that the Chancellor has been spending time with panto characters. The Government blame sub-prime, Lehman Brothers, AIG and all that. Of course, all those things help to explain why all countries are facing tough economic circumstances; the Chancellor says that that is right. However, they do not explain why the slow-down is forecast to be worse in Britain than in any other major economy. They do not explain why the European Commission, the International Monetary Fund and the Organisation for Economic Co-operation and Development predict that Britain will have one of the steepest recessions and one of the sharpest rises in unemployment. For a decade, when the Prime Minister was Chancellor, he took personal credit for the fact that, as he modestly put it, Britain was doing better than anyone else. Now, he refuses to accept any personal responsibility for the fact that, as the world sees it, Britain is set to do worse than anyone else. That will not do.
	Eleven years ago, the Prime Minister inherited a strong economy from the predecessor Government. Now, once again, Britain is on the path to being the sick man of Europe. Labour has done it again. The blame for that lies fairly and squarely with him. The truth about the Prime Minister's record is that during all his years at the Treasury, he became so convinced of his own propaganda about abolishing boom and bust that he mistook a finance and housing boom for stability, and never prepared Britain for the bust.
	The Prime Minister talked of prudence endlessly from the Dispatch Box, but ran up a huge structural budget deficit. He pledged that he would be the iron Chancellor, but let spending rip. He went on and on about the long term while wrecking our pension system. He preached a kind of Presbyterian morality, yet presided over an age of excess and irresponsibility. He created a regulatory system that allowed the biggest financial crisis of our lifetime to develop entirely unnoticed. Indeed, last week he pleaded to a newspaper that he did not know what was actually happening behind the scenes.
	When the credit markets froze last year, the Prime Minister froze, too. The Government were paralysed by indecision, because, as ever, he did not want to do anything that might lead him to admit that he could, in some way, be held to blame. The Budget came and went without anyone noticing, except the poor motorists, who were to be hit by higher taxes. Just days before his own party decapitated him, the drama of the collapse of Lehman Brothers and Washington Mutual threw the Prime Minister a lifeline and enabled him briefly to seize the international limelight with the recapitalisation plan that the Bank of England had drawn up.
	Ever since then, the Prime Minister has been scrabbling around for other things to announce—on housing, on VAT, on almost anything—regardless of whether the measures would work, regardless of the absence of any detailed policy, regardless of the cost or the impact on national debt, regardless of the burden placed on future generations, and regardless of the damage done to Britain's international credibility or creditworthiness. The attitude is, "It doesn't matter whether it is the right or wrong thing to do, just so long as it can be spun as something rather than nothing." That is what the last few weeks have been all about—the short-term political plans of the Prime Minister, not the long-term economic interests of this country.
	That is why Britain is where it is today—badly prepared for the recession, and badly led now that the recession is upon us. It is not just that the Prime Minister failed to fix the roof when the sun was shining.  [ Interruption. ] I will say it again: it is not just that the Prime Minister failed to fix the roof when the sun was shining—his plan for the recession is now failing. Britain has been in recession since July—almost half a year—and at some point the country will ask whether all the promise of action has actually delivered. There is no evidence that the bank recapitalisation has got credit flowing again to businesses; no evidence that the stamp duty holiday has persuaded a single person to buy a house; no evidence that the £12 billion temporary VAT cut has made the slightest difference to the confidence of a single consumer.

Stewart Hosie: Before the shadow Chancellor moves on from VAT, may I point to him that it is £12.5 billion of real money in the real economy—about 1 per cent. of GDP. Would he have been more satisfied if the Government had been straight and said that business would keep that to see themselves through the recession, rather than pretending that it would be passed on to consumers?

Andrew Pelling: On the hon. Gentleman's plans on recapitalisation and repairing the banks, why has the Conservative party set its mind and not made any positive comments about the use of what might be described as the "bad bank" solution—that is, taking bad debts off the banks' balance sheets so that they feel more confident about lending to each other? Has that been a consideration in policy making within the hon. Gentleman's party?

Alistair Darling: Yet again, the shadow Chancellor was pretty thin on what he would do in the face of the global downturn with which we are faced, but I will return to that matter shortly.
	I welcome the fact that the hon. Gentleman has again promised support from his party for the Banking Bill, which is essential as we continue to deal with the fallout from the credit crunch. I hope that the Conservatives now regret that they opposed the Bill to nationalise Northern Rock in February last year, without which it would not have been possible to deal with the problems at Bradford & Bingley during September, in the summer recess.
	The proposals in the Queen's Speech for welfare reform will also be extremely important. At a time like this, when people are likely to lose their jobs, it is important to do everything that we possibly can to help such people get back into work. My right hon. Friend the Secretary of State for Work and Pensions will discuss that when he speaks to the House at the conclusion of this debate.
	There are also measures to continue to build a fairer society, to help victims of crime, to tackle discrimination and to help with training and apprenticeships, and further NHS reforms, all of which have been debated during the past few days. I also welcome the shadow Chancellor's welcome for legislation to ensure that the Government meet the obligation to eradicate child poverty. Let me just say this: a commitment to eradicate child poverty is important, but so too is a commitment to produce the means to enable us to do that. I do not think that a future Conservative Government could provide such a commitment.
	Next year, we will, of course, continue to work with other countries to tackle climate change, as the Prime Minister made clear earlier, and we welcome the agreement reached by the European Union leaders last week. The Climate Change Act 2008, which imposes a legally binding obligation on British Governments, is important and shows that we can set an example to other parts of the world. That is yet another example of how we work with other countries to deal with international problems. Of course, we continue to work with other countries to deal with the problems that have arisen as a result of the credit crunch, which affect every single developed country and other countries.
	That is why it is important that we continue to work with other countries as we hold the presidency of the G20 next year. We have an opportunity not only to address some of the problems of the past that have helped to cause the problems we now face, but to ensure that we reduce the likelihood of such events happening again and, crucially, that Governments across the world act together now to reduce the impact of a recession and help our economies get through this downturn as quickly as possible.

Alistair Darling: Legislation aimed at strengthening the supervision and regulation of the banks is already going through the House. I am sure that the hon. Gentleman is aware of it—or perhaps not—but it is also clear that we will have to take further action. That is why I have said that we need to make further proposals in order to strengthen the system of supervision and regulation.
	I thought that the hon. Gentleman was perhaps going to raise a slightly different point. Sadly, there are two examples in Scotland of banks that should have realised the risks to which they were becoming exposed, and perhaps taken different decisions that would have produced a different result from the one that we now see. Fortunately, we have been able to intervene, but I have to say to him yet again that the Scottish economy would not have been able to support the degree of intervention that the UK Government were able to bring to bear in order to help the RBS and HBOS. It simply would not have been able to do it— [ Interruption. ] The hon. Gentleman can discuss this for ever and a day, but it will not alter the fact that the strength of the United Kingdom greatly benefits Scotland.

Alistair Darling: The reason why we imposed a charge was to ensure not only that the taxpayer got value for money, but that the money we put into the banks did not simply get passed straight through to the shareholders, which people would rightly have complained about. I made it clear last month that we would look at this scheme, and that we would do so before Christmas. The hon. Gentleman was slightly ahead of himself, because just over an hour ago we announced some changes to the credit guarantee scheme. We will lengthen the scheme from three to five years' maturity, lasting until April 2014. We will also widen the range of currencies in which banks can borrow the guarantee, and lower the fee used for the credit scheme while still keeping it on commercial terms.
	All these measures will continue to help ensure that we get bank lending going again. It is difficult because, as the shadow Chancellor said, and as I said to the Select Committee last week, there is potentially a tension between the need to get banks to recapitalise and build up their strength and the need to encourage them to lend to the wider economy. None of these things would have been possible, however, if the Government had not been prepared to take action, and to ensure both that we made money available to strengthen and recapitalise the banks and that the banks had the funds so that they are available to the wider economy. As I said, many other countries across the world are now doing exactly the same thing.

Philip Dunne: On the Chancellor's recapitalisation plan, was he surprised that in the case of the Royal Bank of Scotland, for example, not a single external shareholder, as far as I am aware, chose to invest at that point, and therefore the Government have shouldered the entire burden of that recapitalisation. Was that his plan?

Alistair Darling: It is the case that debt and borrowing will rise. The shadow Chancellor was complaining about what we have done over the past 10 years. We reduced substantially the amount of debt that we inherited from the last Conservative Government, which meant that we are able to spend on front-line services. At the same time, we spent more on public services—on schools, hospitals, police, transport and housing. All those things needed more money after many years of underinvestment. We did increase public spending, but at the same time we reduced debt. Let us consider the position today. Despite all the things that we have had to do to support the economy, our debt will still be less than that of the United States, Japan and Italy. No one wants to be in a position where they have to borrow any more than they need to, and we want to keep debt at as low a level as possible, but to take money out of the economy now at a time like this, if that is what the hon. Member for Braintree (Mr. Newmark—

Alistair Darling: I am going to make some progress. As I was saying, it is important at a time such as this that we take action to help people. We have reduced income tax for 22 million basic rate taxpayers—that will be worth £145 each from April next year—and I brought forward the payments being made in relation to child benefit and made additional payments for pensions. It is all very well for the Conservatives to say, "Yes, we welcome them," but they have to answer the second question, "How do you pay for them?" There is no point in making promises if they are not willing to produce the means to pay for them.
	In addition, we have brought forward capital spending, which will, among other things, help jobs in the construction industry. We have also introduced substantial measures to help businesses in relation to guarantees for loans for small firms, guarantees for small exporters, money from the European Investment Bank and measures to help businesses that are having difficulty with their taxes. Those are all measures that will make a substantial difference.

Vincent Cable: I thank the Chancellor for that clarification. I am not sure about the reference to adjusting what will be paid in the future, because that could mean returning to the normal arrangements or it could mean a clawback. We will no doubt receive clarification on that.
	I endorse the comments made by the hon. Member for Tatton (Mr. Osborne) about Equitable Life. I think that I have introduced at least three debates on the subject over the past 10 years, and we are finally grinding to a conclusion. It is inexplicable that yet another postponement has occurred. The hon. Gentleman did not mention the dreaded word "compensation". I would simply like to ask the Chancellor whether in the current environment compensation payments would be regarded as a fiscal stimulus; that might help the Government to face the issue that they will have to face.
	Let me turn to the main issues surrounding the economy. The position is deteriorating very fast. Quite apart from the difficulties in our own economy, within the past few days the five leading German economic institutes have suggested that the German economy may decline by 5 per cent. next year. We are seeing similar figures from the United States. The fixed-interest market, if it is extrapolated forward, suggests that the markets are already expecting that the period of deflation will last for five years in the US and for three years in the UK. We are talking about something much more serious, much deeper and much longer than any Government forecasts have yet acknowledged. I do not say that with any relish, but simply because we need to face up to the implications of what is involved.
	One of the commentators observed this morning that this is no longer a question of averting the modern equivalent of the 1929 crash. The crash has already happened. The question is whether we can avert 1930, 1931 and 1932. As a reminder, in that period the American economy declined by 30 per cent. and took a decade to recover. Britain's experience was not dissimilar.
	We are talking about a magnitude of crisis way beyond what has been contemplated hitherto. We need to approach it in that spirit, and not with the tiresome party games that we have several times a week in which we decide whether the Prime Minister is 80 per cent. or 20 per cent. responsible for the problem and whether, after the crisis is over, he should be subjected to the economic equivalent of a Nuremburg trial. The responsibility is shared. There have been policy failures here and there is a big international crisis at the same time. We do not need to say anything else at this stage. We need to focus on solutions.
	I want to address three issues that have come to the fore in the past few weeks that we need to think a little bit about. The first is the issue of exchange rates, which is relatively new. Secondly, we need to reflect a little on where we are with the fiscal stimulus arguments. We then need to talk a little more about the banks. The hon. Member for Tatton raised the problem—if it is a problem—of the euro-sterling exchange rate for the first time several weeks ago. He was chided by the Government for being unpatriotic and for talking down the pound. I want to make it clear that I have absolutely no truck with such idiotic arguments. It is perfectly reasonable for the hon. Gentleman, or anybody else, to talk about the pound, and to do so pessimistically or optimistically. That is an entirely sensible subject for debate and there is no reason whatsoever why he should not talk about it—although whether what he said is sensible is a different matter.

Stephen Dorrell: Does it not give the hon. Gentleman pause that the Government's figures, set out in table 1.1 of the pre-Budget report, show that if they borrowed in accordance with their plans, both the new borrowing they incur and the total stock of Government debt resulting from that borrowing will be higher as a percentage of national income than at the peak during either the 1975 recession or the recession of the early 1990s?

Vincent Cable: It is the only comparison we have, and it is what the bank paid, so presumably that is the alternative benchmark that we have to use. None the less, my point is a simple one. If the rate is to be cut, what will it be cut to? If there is to be a subsidy, who will pay it, and what should it be? I agree with the more fundamental point that the hon. Member for Tatton made—indeed, I have made it frequently myself in the past few weeks and months—which is that the banks are being given completely contradictory objectives. They are being told to lend more. They are being told to lend less by the Financial Services Authority, which wants them to hold more capital—perhaps too much capital, given the context. They are being told to repay the Government's loans. They also have their own objectives—to service their shareholders.
	Surely the one thing that the Government have to do above all else is to be absolutely clear about the priorities. If the priority is to lend more, that has to be spelled out explicitly, and it has to override the other objectives. It does not matter whether we achieve that by putting people on boards, or simply by making the objectives very clear. What is completely lacking is any clarity at all about the strategy for the banks. That really has to be sorted out.
	Finally on banks, the Conservatives have come up with a positive suggestion—the idea of guaranteeing new credit. That suggestion is part of the mix, and I welcome it. I should confess that when it comes to that subject, I have some form: 25 years ago, in the last banking crisis, I was invited to work with Lord Lever, whom some Labour Members may remember, on coming up with a way of getting credit going in a banking crisis—in that case, the crisis related to Latin America. Indeed, my hon. Friend the Member for Eastleigh was involved in the same exercise. The solution that we came up with was a loan guarantee scheme. It never actually worked. The problem posed was as follows: either we insist that banks take a share of the risk—that is the right and fair thing to do, but if we do that the banks do not do anything, because they do not want to take risks—or we effectively underwrite the lot and nationalise credit. It is not clear which of the two is being proposed. It seems to be a bit of each, or something between the two.
	A rather perceptive comment was made by the political editor of  The Independent, who said:
	"the National Loan Guarantee Scheme is potentially even more statist than Labour's schemes."
	That may be right. If the scheme is to work on a large scale, that is what is involved—the nationalisation of credit, and some of us are not totally repelled by the idea. None the less, we should be clear about what is involved.
	In conclusion, we are faced with a desperately serious and deteriorating situation. The figures that have come out in the past few weeks for some of the other developed countries are positively alarming. What is required is not a single-bullet solution, but a combination of measures: a radical approach to monetary policy, cutting interest rates, fiscal stimulus and radical action to get bank lending working. What is needed is not one of those measures, but all of them.

John McFall: It is a pleasure to speak in this Queen's Speech debate. The 2008 pre-Budget report stands as a testament to the significant change in outlook for the economy over the next few years. There has even been a change since the forecasts provided by the Treasury at the time of the 2008 Budget. The downturn has spread to the real economy for the financial sector, so it is appropriate and important that we examine the issue of bank lending.
	The Governor of the Bank of England, in his evidence to the Treasury Committee on the November inflation report, stated that he was in
	"no doubt that the single most pressing challenge to domestic economic policy"
	was
	"to get the banking system to resume lending in any normal sense".
	However, the market is telling the banks that they must hoard capital, so individually banks are trying to strengthen themselves by reducing their lending. That action on the part of each individual bank is having a collective effect. The reduction in bank lending is slowing the economy to the point where jobs are being lost and companies are becoming insolvent. That in turn raises the loss rates on bank lending.
	One expert witness before the Committee said:
	"It seems to me to be not adequate to give the banks money to back up their balance sheets and then expect them individually to behave in the collective interest; they cannot. Any self-respecting bank management, not having confidence that the others were going to do the same, would batten down the hatches and be cautious—to the point of recklessness from the point of view of the collective interest."
	Let me stress the key phrase: banks are being
	"cautious—to the point of recklessness".
	The Government face a dilemma. Despite the considerable injections of capital and the credit guarantees, bank lending seems either unavailable or overly expensive. Where, ask the public, is the payback for the taxpayer assistance provided to the banks?
	We must be prepared to think flexibly, perhaps even radically, about the next steps. If the lending panel is unable to persuade the banks to start lending again, we may have to be bolder in our prescriptions. Nothing should be ruled out. Indeed, when the Governor of the Bank of England came before the Committee a couple of weeks ago, he said that nothing should be ruled out, including the possibility of nationalisation. The Government must consider directing the banks to lend, as suggested by Roger Bootle to our Committee. It could be considered a market failure if the banks did not lend more, so a public sector intervention could be warranted to produce a better overall outcome, as I have said.
	Of course, if the banks take that direction, it will raise its own problems. A careful balancing act is in operation between the Government's need to receive repayment, the needs of the banks, which do not want further to damage their future profitability, and the needs of consumers and businesses, who need additional lending by the banks now. One of the messages that the Government should get across to the banks is that they should consider themselves nationalised for quite a long time, so that we can get the problem sorted out. The Committee visited Sweden; in the 1990s, that country had problems, and some of the banks there are still nationalised. In fact, there is still 20 per cent. Government investment in the top bank there. A long time is needed to sort out the problems that we are discussing.

Malcolm Wicks: I do not have the time to, sir; I am sure that we can debate these matters later in a prominent London borough.
	Some of the people who feel that they have a right to stay on benefits have little understanding of the effect of that on their fellow citizens; those who pay for benefits include people on low wages, and their circumstances are often little different from those of people on benefit.
	In conclusion, although I support the broad thrust of what the Government are doing on what we now call—copying the Americans, for some reason—welfare reform, we need to approach the task sensitively. The Government are doing that. I always thought it a nonsense that until very recently we were telling lone parents that they could stay on benefit until their youngest child was 16. That was a nonsense, given that many other parents in two-parent families were working when their children were far younger. The policy did not do the lone mother or her children any good.
	I like the direction in which we are moving now; we are being more realistic about the issue. However, we need to be sensitive, and Ministers are being so. There is some talk that people should be in work when their child is one year old. Let us be sensible. By all means, we should encourage such parents to go on training and enhance their skills and the rest, but such children are so preciously young and we should not spoil a good policy by appearing to be too tough-minded and too negative about those caring for the youngest child.

Peter Viggers: The right hon. Member for Croydon, North (Malcolm Wicks) made a thoughtful and constructive speech, and I am sorry not to follow his theme, but I want to talk about the economy.
	The Chancellor of the Exchequer said in his Budget in March:
	"Britain is better placed than other economies to withstand the slowdown in the economy."
	He went on to say:
	"I am able to report that the British economy will continue to grow throughout this year and beyond."
	Later he underlined the point by saying that
	"we enter this period of uncertainty better placed than any other major economy."—[ Official Report, 12 March 2008; Vol. 473, c. 285-287.]
	Since then, of course, the markets have blown the Government a decisive raspberry. The pound has fallen 26 per cent. against the dollar and 14 per cent. against the euro. The Government have clearly got this completely wrong, and the situation is dire. For 10 years, they have been boasting about their brilliance, notably the current Prime Minister with his glutinous self-satisfaction in his Budgets. How did they get away with it for 10 years? The truth is that during that period we have had a tailwind of globalisation, with first, the Asian tigers, and then the BRIC countries of Brazil, Russia, India and China. They have had 9 to 14 per cent. growth, and the rising tide of prosperity has covered the horrors that this socialist Government have imposed on us.
	There are two main issues: first, we are over-taxed; and, secondly, we are over-governed. Both are equally important. Tax is cumulative—we pay direct taxes, indirect taxes, fuel duties, excises, and council tax. The burden of tax is too high, unfair and, in many cases, too complicated. We are over-governed, with all kinds of legislation under the umbrella of human rights, European legislation, health and safety, freedom of information and the ghastly tax credits system. We are being micro-managed, and too many public sector jobs and pensions have been created. The situation was really quite bad, but it has taken this Government to make it dire.
	The hon. Member for Twickenham (Dr. Cable) tried to think of a doppelganger for the Prime Minister and came up with Stalin and Mr. Bean. I have been pondering this, and I think that I have come up with a better one. Think of a big guy, a bit overweight. He is a Labour Member of Parliament, difficult to work with, thinks that he is brilliant and the rest of the world is stupid, tells us that black is white and white is black, and goes around stealing from pension funds—yes, it is Robert Maxwell. I mention pension funds because the two legacies that this Prime Minister will leave are the damage to the economy and the damage to the hopes of many people in their thirties and forties who have no chance of enjoying the level of dignified and comfortable retirement that current pensioners have. The Prime Minister is responsible for that serious problem, which results from the loss of and damage to pension funds together with the weakness of the stock exchange and assessments on longevity.
	I want to turn to the banking crisis and where we stand now. The diagnosis of the problem and the analysis of how to work our way out of it have been very unsophisticated. In the United States, the concept of putting together a $700 billion fund to buy out toxic assets was completely wrong. Similarly, in this country, pumping money into the banking system has been unsophisticated. Why should anyone invest in an asset of uncertain value? The best analogue for our present situation is the situation at Lloyd's of London in the early 1990s—it was called the spiral. Lloyd's underwriters would underwrite a risk and pass it on to sub-underwriters, and it went round in a spiral, with sometimes the same risk being insured several times—not just twice or three times but many times more than that. The spiral caused Lloyd's immense problems. I was there. Following my time as a director of a secondary bank in the 1970s, I sat on the Council of Lloyd's—in fact, I sat on its audit committee as an outside name—trying to put the situation right.
	I have made this comparison before, and I am pleased that others have now made it. The  Financial Times reported on 17 November:
	"Lloyd's, the insurance market that almost collapsed under heavy losses, survived through a restructuring that was the 'prototype of the bad bank', offering hope to financial institutions grappling with toxic debt, said Lord Levene of Portsoken, chairman of Lloyd's."
	Lord Levene went on to explain how this was done. Banks should create a subsidiary to accept the assets that cannot be confirmed to be of a certain value; for the sake of shorthand, I will call them toxic debts. The toxic debts are put into the toxic subsidiary, and then the purged entity—the parent company—is a bank that can demonstrate its value and the fact that it is worthy of investment. As I said, why should anyone invest in an institution if its assets cannot be confirmed to be of a certain value? That is why people have been so reluctant to invest in the City and in banks, and why all banks are now reluctant to pass on credit to other banks and make loans.
	That approach can work out extremely well, as it did in the case of Lloyd's. The subsidiary in question was called Equitas. Each of the insurance underwriting syndicates delegated its toxic assets to Equitas, which was managed separately. As Lord Levene said in his interview with the  Financial Times,
	"'If you have got this great boulder hanging over your head you need to concentrate on that all the time', he said. It makes it easier to move on, 'if you say we will let someone else concentrate on that and we will carry on running the ongoing business.'''
	In the case of Equitas and Lloyd's of London, the asset was eventually sold off to Warren Buffett. The toxic assets had been "managed on". The great advantage of doing it in that way is that by pulling together the spiral of collateralised debt obligations and other assets that have been loaned on from bank to bank and identifying the weakness in the market, one finds that the loss had provision made against it by more than one institution, so the provision against loss is not only duplicated but multiplied many times, and the loss is less than one originally expected.
	The Government have completely failed to identify the main problem, which is the banks' unwillingness to lend. The Conservative Opposition are exactly right in proposing a scheme that would guarantee lending and carefully target action where it is most needed. This Government are floundering. I have never felt more strongly that workers and advisers in the Treasury and the Bank of England should argue their point strongly with the Government. Above all, however, it is crucial that we have the opportunity to give the voters a chance to vote this Government out and a competent Government in.

Stephen Dorrell: I begin by declaring an interest as a director and shareholder of a trading company.
	Harold Wilson famously said that a week was a long time in politics, but in 2008, three months has come to seem like half a lifetime. It is worth reflecting on how far we have travelled since 1 September. Three months ago, the Prime Minister was still bathed in a sort of jaded afterglow from his affair with prudence. It is ironic, given the events of last week, that at the beginning of the autumn, our most reliable ally in arguments in ECOFIN was Germany. The Germans saw the British Government as one of the most reliable advocates of the case for the liberal market economy, which is ironic given the statements that came out of Germany last week.
	At the beginning of September, the Chancellor retreated to a Scottish island and told us by newspaper interview that we faced the worst outlook we had seen for 60 years. In the ensuing three months, we have seen things happen that were unthinkable as recently as summer this year. The Government have emerged as a majority shareholder in the Royal Bank of Scotland, and they are a major shareholder in Lloyds. They swept through a sweetheart deal between Lloyds and HBOS, which has established a dominant position for that bank in the domestic mortgage market, and we have seen the Budget deficit balloon in a period of eight months. The estimated Budget deficit for next year has increased by £80 billion, from an estimate of £38 billion at the time of the Budget to £118 billion now. There has been a new initiative every day and, as my hon. Friend the Member for Tatton (Mr. Osborne) made clear earlier, we have seen all the weaknesses of government by headline. Ministers have not thought through the detail of one policy before moving on to announce the next.
	Against that background, I want to offer the analysis that two major policy developments have taken place during those three months: one with which I broadly agree and one with which I fundamentally disagree. I shall start with the analysis with which I broadly agree, and which led the Prime Minister and the Chancellor to call a press conference and say that the key priority facing the liberal economies of the world this autumn was the stabilisation of the banking system. That analysis led them to address the weakness of the balance sheet of the banks, and I believe that it was 100 per cent. right. There is no point in trying to build a future outlook for a market economy that does not recognise the centrality of the banking system to the allocation of capital within a capitalist system, and there is no point in talking about liquidity and getting credit moving again before the banks have been stabilised as institutions.
	The Government were right to put the emphasis on achieving that result, but they have not followed through that analysis, because having stabilised the banking system, we have then witnessed round after round of ministerial frustration. We have been told repeatedly that the banking system has not been freed up; well, of course, it has not been freed up. One simple policy move—strengthening the balance sheets—has not solved the myriad problems that built up in the banking system in the period before autumn this year. The ministerial drive to move on to the next initiative rather than focus on the core priority of getting the banking system moving again is one of the core weaknesses of the Government policy that has evolved during the autumn.
	My hon. Friend the Member for Gosport (Sir Peter Viggers) was entirely right to say that we cannot expect the banking system to function properly again until the issue of inherited toxic debts is seriously addressed. The banks have to fess up to the level of bad loans that they have and the number of bad assets that sit on their balance sheets. Until those are cleared out, they cannot raise new loans in the inter-bank market and get the banking system moving again. That is one element of the problem.
	Given the experience of what has happened to us during the past 12 to 24 months, far from being told by Ministers that we need a return to 2007 lending levels, we—and certainly lenders to banks—want confidence that the banks themselves have relearned the basic essentials of good, sound risk assessment in making lending decisions. The ministerial focus—the focus by the authorities—on recreating a functioning banking system was an entirely correct priority, and it is overwhelmingly the most important priority we face today. It is regrettable that Ministers have flitted from initiative to initiative, rather than focusing on the delivery of that central priority.
	As my hon. Friend the Member for Louth and Horncastle (Sir Peter Tapsell) said—he bemoaned the fact—one can cover things only extremely superficially in 10 minutes. I said there was one area with which I agreed and one with which I disagreed. I have focused on the former and emphasised the need for the re-establishment of effective lending at the centre of the capitalist system. However, I profoundly disagree with the implication in the debate today that there is somehow a choice to be made about whether we are in favour of or against a fiscal stimulus, and that one can merely opt for one side or the other of that argument without any assessment of the quantum of fiscal stimulus being advocated. That is why I sought to intervene on the Chancellor and did, in fact, intervene on the hon. Member for Twickenham (Dr. Cable).
	I wish to point out that, because of the choices that the Government have made to deliver fiscal stimulus and allow the stabilisers to work, and most importantly to build upon the inherited structural deficit that has built up over the past four to five years, we face, as we go into this recession—I agree with my hon. Friend the Member for Louth and Horncastle about its severity—a situation in which, according to the Government's own estimated borrowing plans, in 2009-10 net borrowing will run at 8 per cent. of national income, and that assumes that they do not overshoot. However, at the same point in the 1975-6 cycle, the Denis Healey chancellorship incurred a borrowing level of 7 per cent. of national income, which is 1 per cent. lower than that currently planned by Ministers. All those figures were set out in the pre-Budget report published by the Government.
	We are already planning higher borrowing than the level the Government had in the mid-70s, which led to the arrival of the International Monetary Fund, both in the new borrowing to be incurred during 2009-10 and in the planned level of net debt that the economy will bear by 2012-13. That is the peak level in the Government's plans, which show 57 per cent. of net debt to national income against a peak level of 54 per cent. in the 1970s. The argument is not whether we are in favour of or against a fiscal stimulus. Of course, we know that if the stabilisers are at work, Government borrowing will increase during a recession. Conservative Members are concerned about the attitude of Ministers, because having gone from being prudent and cautious and seeking to dress themselves in the language and clothing of caution, they now imply there is no limit whatever on the Government's capacity to borrow to restimulate the economy. Ministers are already planning to take us into a deeper hole than the one Jim Callaghan's Government took us into in the mid-1970s.

Frank Field: I wish to revert to the sombre note that the hon. Member for Louth and Horncastle (Sir Peter Tapsell) sounded, and the reality that he gave the 1929 to 1931 slump by describing the impact on his family. He was too polite to remind the House that national income fell by 5 per cent. during the whole of that slump—a huge drop. He described the impact of such a fall in national wealth on employment.
	The results that the National Institute of Economic and Social Research published a few days ago for the last completed quarter show that national income is falling at 4 per cent. a year. One hopes that the cumulative effect will not occur, but the treacherous economic domain into which we are entering may be as serious, if not more so, than the inter-war slump. We are debating that today, and we need to deploy whatever talent we have to try to influence Government policy.
	In some ways I am more miserable than other hon. Members, because I fear that the Government do not have the room to manoeuvre that many Back Benchers suggested in their speeches. The amount of borrowing that we have to undertake and the potential troubling rate of inflation, which will dominate our economy, place genuine restraints on Government action.
	I do not believe all this guff about how we are about to enter a period of negative price increases. I think that, sadly, the opposite will occur. The projected levels of borrowing that the Government gave us in their pre-Budget report, which the right hon. Member for Charnwood (Mr. Dorrell) touched on a moment ago, are in the region of £150 billion a year for every year until the Government stop estimating. There will be real problems in unloading that level of debt in the gilts market. The amber signals will flash for the economy when long-term interest rates are pushed up, which will kill the chance of a quick economic recovery.
	I have also questioned elsewhere whether we will be able to unload that level of debt, and what that will mean for parliamentary and party government in this country. It is crucial that the leaders of the three major parties and the parties in Scotland and Northern Ireland should now be involved in talks about what we do if the worst scenario comes about. Of course we all hope that the best scenario will embrace us, but we also have a duty to think about the worst scenario.
	That is why Wednesday's debate on the VAT increase will be so important, because it will be a pointer to the markets. Nobody is now defending the 2.5 per cent. cut in VAT. It is like spitting in the face of an economic hurricane. The shops are already cutting prices by 30 to 50 per cent. If anybody on the Government Benches thinks that a cut in VAT will save one job in their constituency, I will give way now. Sensibly, nobody is rising to the challenge.
	Because of the restraints on the Government, we desperately need to look into how we best spend our money. We need to spend our money on extending credit to the firms that will go bust unless they can secure it. If hon. Members do not take the argument seriously enough, let me give an example. The cargo rates to China are now one tenth of what they were last year. The reason is not that China is not trying to suck in huge amounts of the world's primary resources, but that people who trade do not believe that their bills of exchange will be met. Companies will fold—they will fall like dominoes—unless the Government act.

Frank Field: No, I will not give way—well, I might in a minute.
	My plea to the Government is to rethink how we can get some of that precious £20 billion that will otherwise be wasted on the VAT measures into credit for firms, and thereby protect our constituents' jobs.
	The other thing that limits the Government's room for manoeuvre is inflation. For the Bank of England to say that inflation is not a worry, when the current rate of inflation is well over two times higher than the top of the target range, is moonshine. The spot market in oil is already prophesying that the price of oil will be significantly higher next year than it is now. Hon. Members nodded in agreement when the Liberal Democrat spokesman pooh-poohed the worry about the falling pound. A falling pound might give our exporters a greater chance, if there are markets in which they can sell, but a falling pound pushes up import prices and therefore adds worryingly to inflationary pressures, which are already high in this country.
	There are two huge restraints on the Government. I beg them before Wednesday, when we debate the order giving them the authority to make what now appears to be an absurd cut in VAT, to save that £20 billion and get it to companies, which may save some of our constituents' jobs. Before I leave this point, I too remind the House what the 1930s were like for someone who had to live through them. We now need to move together to try to get policies that will mitigate the terrible economic disaster that is about to engulf our society.
	In saying that, I welcome the welfare reform measures. We have a most talented Secretary of State for Work and Pensions, but he is being wasted by the absurd programme, to which he has nailed his colours, that says that if we talk tough and start roughing up claimants, they will somehow start going to work. Claimants know that Governments have spoken like that before, and then we hardly apply any sanctions.
	The one piece of information that I want to give the House, however, is this: one third more claimants were leaving jobseeker's allowance at the bottom of the last recession than were leaving it earlier this year, at the top of the boom. There is clearly something happening in our labour market to suggest that welfare reform is crucial. I make a plea that we do not get too serious about single mums, who actually have the job of raising children. However, there are large numbers of people under 25 who have never worked, who think that they have a minimum income from the Government, and who have no intention of working. That applies in my constituency and in every other constituency in the country.
	The previous Labour Government introduced the community programme, which was workfare by another name. It did some useful work in our constituencies. My plea is that we should scrap all this new deal stuff—the treadmills that people are on that punish them by sending them on training, instead of regarding training as a reward to get them out of the rut that they are in—and concentre money on reinventing the community programme. We should say to young lads, "You've been on benefit for this long. There's now a job for you on the community programme. You either take it or you lose benefit." That would smack of serious welfare reform. Given our Secretary of State's talents, I hope that he will return to that theme before too long.
	The theme of this debate is, rightly, the sombre note that the hon. Member for Twickenham (Dr. Cable) and the hon. Member for Louth and Horncastle (Sir Peter Tapsell) struck. We might be on the brink of an economic catastrophe, and we need to mitigate its effects on the lives of our constituents.

Stewart Hosie: Indeed. However, the stimulus package came after the announcement of the $150 billion package from the USA in February, and after the €18 billion plan announced in Spain in April. It also came after the announcements in October of the plan in France to fund 100,000 subsidised work contracts, and the $275 billion plan in Japan that would result in $20 billion going straight to Japanese households. The package also post-dated Germany's announcement in early November of a €50 billion plan, and even China's £375 billion economic plan. So there has been a great deal of puffed-up hyperbole from the world-savers on the Labour Benches, but this Government have not led, nor has the Prime Minister saved the world. Indeed, I think that the old adage might well apply to him: he is their leader; he must follow them.
	The UK Government have argued time after time that in this global crisis, we cannot insulate ourselves from the financial turmoil. That is absolutely true, but it does not allow them to abdicate responsibility for their part in the crisis. They look at this situation through a particular prism, which allows them to say that they have done everything right and that national debt was always low. That is ridiculous, because it was already a colossal £500 billion in the last Budget. It seems even more silly when we consider the hundreds of billions of pounds of private finance initiative liability, much of which is off balance sheet.
	In this year's pre-Budget report, we saw PFI liabilities to 2033 reported at £216 billion—an increase of nearly £30 billion since last year. That increase is set against an increase of only £4 billion in the capital value. That means £7 of repayments for every £1 of capital—and that is not even the end of the story. Secreted away on the Treasury's website is the full list assigned projects—reporting to 2048—involving another £24 billion of liabilities, which were not even included in the pre-Budget report.
	In economic terms, we have become used to the Government trying to hide things and making the wrong decisions. They reduced the Scottish Government's block by manipulating the English spending Departments' baselines. They hid their plan to raise VAT to 18.5 per cent. They subjected the whisky industry to two duty rises in a single year. They also kept on the books their plans for a real fuel duty escalator from 2010, and they are planning a £1 billion cut in Scottish spending when we are entering a recession, and public expenditure must play an essential part in the stimulus package.
	The fundamental problem with the Government's economic plans in the Queen's Speech and the pre-Budget report is that they are based on wildly optimistic assessments. They assume an early exit from a short recession, and rapid growth thereafter. The International Monetary Fund suggests that the recession will be deeper, and the recovery longer and much more difficult. Even with £300 billion of borrowing over the next three years and a doubling of the national debt thereafter, the Government already have a black hole in the public finances that can be measured in tens of billions of pounds.
	My biggest fear of all is that this Queen's Speech was not concerned about the future of the economy. It was a thin, sparse, cut-and-run Queen's Speech from a Government who think that they have got their lines against the Conservatives bottomed out, and now want to play politics with the misery of millions of people as we head into a very deep recession.

William McCrea: It is a pleasure to follow the right hon. Member for Stirling (Mrs. McGuire). She made a thoughtful speech which is worthy of careful consideration. It was preceded by—as usual—an excellent speech from the right hon. Member for Birkenhead (Mr. Field), who has a tremendous passion for the issue of welfare reform and a great deal of personal knowledge of it.
	There is much to be welcomed in the welfare reform programme, and it is important for us to deal with it in the context of today's wide-ranging debate on the economy, pensions and welfare. We need to realise that there are those who genuinely wish to obtain work, and that it is important to enable people to get back to work or into work. Our problem is the number of job losses throughout the country as we enter the depths of a recession. It will be difficult to get people into work if the jobs are not there for them, and that is another challenge for us to face.
	We must also bear in mind that there are those who do not want to get into work; we should be honest about the fact that there are those in society who desire to remain on benefits because they receive less for going out to work than they do from being on benefits. We must look into that, and the Government must tackle it, because it is vital that every person who is capable of working is given the opportunity to do so—and, indeed, is encouraged to do so, as it is very good for those people personally and for their families that they have gainful employment and therefore a reason to get up in the morning.
	The hon. Member for Gosport (Sir Peter Viggers) said that society has two problems in that we are both overtaxed and over-governed. I have much sympathy with that point of view. I certainly believe that we are overtaxed, and many of those taxes are indirect taxes that are slipped in—they come in unawares. Our constituents loathe such indirect taxation, whereas direct taxation is open and lends itself to being debated. We are also over-governed; business and society are over-laden with bureaucracy. That is another issue that a Government of whatever political hue must tackle.
	I want to focus in the remainder of my speech on the economy. It is true that many of our citizens in the UK have enjoyed prosperity and good times. However, we are now facing a situation of crisis proportions, and it is a situation that is deteriorating. The economic challenges we face are perhaps tougher than any previous such challenges, and the younger generation have certainly never experienced a similar situation. The credit crunch and recession are realities, and it is true that worldwide influences have played a part in that recession. Job losses are also a reality, as are fear and concern within communities. We are, therefore, facing tough economic circumstances, and many fear that we are facing a very deep recession. Although it is true that the situation has evolved and worldwide global pressures are placed on us all and on Government, the Government must also accept their responsibility. Responsibility can be shared, but accountability must be accepted by those who are in authority over us. At such times of crisis, therefore, people look to Government to give them a very definite lead.
	I listened with interest to the advice of the hon. Member for Louth and Horncastle (Sir Peter Tapsell). He talked about the knockabout debate that goes on in the political arena, and he encouraged us to take our debates beyond that. In listening to this debate, I have heard Members of different parties claim that the Prime Minister or the Chancellor said this and that the Leader of the Opposition or the shadow Chancellor said that—and Members will then refer back to the paper record of events and find out what they actually said. Where does that take us? We are facing a very serious situation and the long-term economic prosperity of our country is at stake. Therefore, we must ensure that the steps that are taken go towards solving the current situation and laying a solid foundation for the future prosperity of our people.
	I have spoken twice on the measures that have been taken: in an intervention in a recent debate, when I asked the Chancellor a question; and during Prime Minister's questions last week, when I asked about the banks' situation and encouraged the banks to pass on the cuts in the cost of borrowing to both their domestic and business customers. Many small and medium-sized businesses are facing a financial crisis, and some are going to the wall. They are going bust not because the basis of those businesses is not good and their plans are not solid, but because they do not have the financial wherewithal to progress their business and face the challenges of this particular time. Therefore, we once again ask the Government to take further steps to ensure that our banks, which have been saved by the taxpayer, pass on the interest rate cuts. I trust that the Chancellor and the Prime Minister will do that.
	In Northern Ireland, there is also a situation involving the Presbyterian Mutual Society. The Government should work closely with Arlene Foster, Minister of Enterprise, Trade and Investment in Northern Ireland, to protect fully the millions of pounds belonging to Northern Ireland savers that were lodged with that society. Therefore, I once again encourage the Government to ensure the availability of bank credit. That has not been made available in the way we should be able to expect by the banks that have been bailed out by the taxpayer. This is the biggest single issue currently affecting businesses, and I trust that the Government can persuade—and, if necessary, force—the banks back to more normal lending. That would be of benefit to our economy. Also, although the decision to cut VAT by 2.5 per cent. was one way of passing money into people's hands, we will have to wait and see whether the people spend it.
	We must rebuild confidence. There must be openness and frankness in this debate. There are two sides to that. There must be openness concerning the fiscal stimulus, because any such stimulus will have to be paid for; that is the reality. However, it is also reality that if there is not a fiscal stimulus, there will have to be cuts. We had better be open, therefore, and I believe we need to lead from the front within the community. There must be openness and frankness. There is no single bullet; we must employ all our talents together. I appeal for a collective wisdom from across the House to ensure that we do what is best and what is in the interests of long-term stability, by facing the present challenges while building for the future prosperity of our people.

James Plaskitt: In this debate so far, every Member who has spoken on the economy has touched on the issue of banking and the need to stabilise the banking system. We have heard broad support for that from across the Chamber. I, too, want to focus on banking, but to go one step further than just thinking about the banking system in our own country. I want to look at some of the root causes that led to the current problems in the banking system not just here, but across the world.
	When my right hon. Friend the Prime Minister was in the Chamber reporting back to the House on the G20 meeting he attended, he referred to fundamental reform of the supervision of the financial system, and we understand that G20 teams are working on a series of papers to turn that into reality, which will be presented to the G20 at its next meeting in March. I welcome the fact that work is being done on the international regulation of banking, but I have some concerns that the timetable for that work to be done is extremely rapid while the issues that need to be grappled with are truly huge. The slight risk is that we might achieve only marginal change, whereas, on the evidence of what has just happened, the situation suggests that we need to go much further.
	My right hon. Friend also referred in discussing these matters to "revising the Basel accords", and I want to take a moment to look at the Basel system. When what is now called the Basel II system was agreed in 2004, it was launched in glowing terms and described as
	"the revised framework will promote the adoption of stronger risk management practices in the banking industry".
	That claim now seems very hollow indeed. The Basel II agreement was a replacement for the original Basel agreement, which had proved to be not up to the job. However, I am afraid that, after a decade of negotiation, Basel II, which has been launched relatively recently and is only just beginning to come into effect, is already dead on arrival. The sub-prime crisis has shown that the model envisaged in Basel II is already inadequate and therefore beyond tinkering with. If we are really to address the problems in the international banking system, we need to look for something with much more substance than that.
	We can see now that the Basel system displays a significant number of weaknesses. First, it comprises what has been described as "soft law". In other words, it is in no way legally binding. Its status is not even permanent: there are no permanent staff behind it to support it. The second major weakness of the Basel approach is that it is not at all about compliance; it is only about supervision. Nor does even Basel II—the so-called strengthened version—address at all the issue of systemic risk. In fact, it very much reflects the G10 banking culture that dominated all the negotiations that led up to the agreement. That culture is not relevant to the many parts of the international banking system that are now caught up in the consequences of what is unfolding.
	The real problem is that the Basel system depends on more than 100 different national regulators. Here, the Financial Services Authority is the first to interpret and then to apply the guidance given in Basel. Its other weakness is that it concentrates almost entirely on the issue of capital requirements, which was also an obsession throughout the decade of discussion that led up to the eventual agreement. It says very little—in some cases, nothing at all—about the problems of banking liquidity, about leveraging, about reputational issues or about the use of off-balance-sheet activities. Yet, as we have seen, those are some of the major faults in the system that have given rise to the current problems.
	Most of the difficulties that I see in the Basel II system—this is why I suggest that it needs fundamental reform, rather than mere amendment—rest essentially on internal risk-basing. That was the absolute principle that the banks demanded throughout all the negotiations, and which Governments in the end conceded. However, there are four main problems with internal risk-basing, which are now painfully apparent after what has happened. First, it allows banks with complex risk-taking models to select their capital adequacy levels from a range of options. Secondly, it allows banks to use their own measures to determine the degree to which they are exposed to risk. Thirdly, it allows banks to allocate their own risk-weighting to their assets, including those that are off balance sheet. Fourthly, it allows banks to use their own estimates of the probability of any one of their assets going into default.
	What are the consequences of such a system, based as it is on internal, risk-based assessment? The system says that it is fine to reduce capital charges on what it declares to be lower-risk lending. What example of lower-risk lending does it cite? It cites residential mortgages. Well, we have seen the consequences of doing that. We saw another consequence when Adam Applegarth appeared before our Treasury Select Committee. He said that it was Basel II compliance that suggested to him that it was fine for the Northern Rock bank to increase its dividend, rather than shore up its levels of capital.
	As I said, Basel II has only soft-law guidance—nothing harder than that—which has been shown to be wanting in the conditions that we now face. Basel II therefore displays fundamental weaknesses in terms of a system of governance or regulation of international banking, which is now what we are seeking. In truth, what we have is a global financial structure supervised by a balkanised system of regulation. That is, and is always going to be, an unequal struggle, and international standards will always come off worse in that conflict.
	That is the situation that we are in, and I am afraid that that system will result in a race to the bottom in terms of in-country regulation, because regard for national competitive advantage will always trump regulatory concerns in those circumstances. We have seen, through the negotiations that led up to Basel II and the way in which it has been applied in the last year or so, that Governments in the end generally cave in to the banks' demands, because that architecture allows the banks to use the "going offshore" threat that resonates so much with Governments.
	So the question is: if the G20 is looking again at the Basel agreement and is working on proposals for the spring of next year, what do we need to do to put in place a system that is appropriate for the challenges that we face, and which can move beyond the platform that Basel II itself presents? What we really need is regulation or supervision on the scale of that which we are trying to regulate or supervise; that is the imbalance that must surely be corrected. The logic of that points to a very different approach from the current one. The gaps that need to be filled are fairly obvious. We must have a system that addresses systemic risk.
	Banks can now prove beyond all doubt that some of them—many of them—are too big to fail. That underwriting that Governments have now put in place, which was of course the right thing to do, has introduced what is called "shadow equity" into the system, and with it a potential moral hazard. However, because it is there, I see it as giving Governments the right to insist, if we are taking forward a new model, on some global minimum standards of regulation that must apply across the international system. Those must go beyond simply the issue of capital adequacy. We have got to address liquidity, leveraging, securitisation, off-balance-sheet activity, accountancy standards and incentive structures, and we must have early-warning devices. At the moment, Governments around the world rescuing their banks have the upper hand in this argument, but as time passes the terms of trade may shift back towards the banks and away from Governments.
	The hard truth is that if we are not to revisit this situation at some future time, we need some pooling of regulatory sovereignty, giving powers to an international supervisory or regulatory body that is on an appropriate scale to supervise or regulate that which needs to be regulated.

Robert Syms: First, I declare my interest in the Register of Members' Interests: I am a director of a family property and building company.
	We live in difficult, almost uncharted times, and I am not sure that we have the solutions to what will be a difficult few years ahead. Ours is an open, liberal economy with a very large financial sector that benefits and has benefited us and has created lots of very well-paid jobs. That means that we will be affected by what happens worldwide. However, it is also legitimate to say that there are signs that we have gone into a difficult period rather less prepared than we could have been. A lot of that goes back to one of the first decisions that this Government made, which was to give independence to the Bank of England. Two things then occurred: the Financial Services Authority was set up to regulate banking; and a lot of the big disasters occurred under that system, which has also given us occupational pensions, the Equitable Life situation and the various other things that have gone wrong in the past few years.
	I rather think that the previous system, in which the Bank of England regulated the City, was better. I remember that there was a banking crisis when I left school in 1973 or 1974, when many secondary banks went out of business. Slater Walker had problems. Several other banks went out of a business, a lifeboat was formed and the banks sorted the problem out before it became a major one. Changing from a rather more informal system, whereby there was a flow of information, to a much more formal clipboard-type of system has not worked that well. I am aware that the City is a far larger and more international organisation than it once was, but I cannot help feeling that the FSA's watch has not been a good one.
	The other relevant issue is the independence of the Bank in setting interest rates. On the whole, that has had plaudits over the past decade, but I begin to wonder whether the Bank's independence and its setting interest rates has done us any great favours, given that we now have one of the biggest financial busts. I say that because it is clear that there should have been a squeeze and higher interest rates rather earlier. When 120 per cent. mortgages are available, when people are borrowing four or five times their income, when the house-price boom is clearly unsustainable and when first-time buyers cannot get into the market, that is bound to have an inflationary impact on the economy. Therefore, the Bank of England should have acted earlier.
	Against that backdrop, it was a little foolish of the Government to continue spending up as they have. The profile of our tax receipts—a lot is City-related and a lot is housing-related—means that they should have done what the Germans did: run a fiscal surplus. One of the reasons we are going to find things very rough and why our room for manoeuvre is rather more limited is because we spent. The Government argue that they spent on schools, hospitals and so on. There were many good things that the money was spent on, but given the rough weather that we have encountered, their decision was foolish and it means that they are far more limited in what they can do.
	We have had some discussion about whether the VAT changes will make a lot of difference, and set against the discounting in the high street, I am somewhat sceptical that they will. Indeed, many businesses are finding that there are quite a lot of costs attached to altering VAT. Poole borough council, among others—indeed, all the local authorities that we represent—has spent quite a lot of money making the necessary alterations.
	The most important thing is that we deal with the credit markets and with the banking system, because credit still is not flowing. I commend the proposal of my hon. Friend the Member for Tatton (Mr. Osborne), because we must get credit flowing to businesses. If credit does not flow to businesses, either through banks or through some support for lending, no matter what the Government do we will have a sharp downturn that will result in very high unemployment.
	I am sceptical about the VAT measures, but if the Government are serious about achieving a fiscal stimulus, they could do a lot worse than to start building some council housing. There is a need for housing, there are a lot of unemployed building workers and land is available because the private sector is building almost nothing. That would be a logical sector in which to provide a stimulus and it would leave a lasting legacy, as opposed to opting for a temporary VAT cut, which will not do what the Government want it to do.
	There may be an argument for a fiscal stimulus, but what the Government are doing will not have the impact that they hope. As we all know, the difference between Government spending and tax revenues are two very large figures. If the Government are being a little optimistic about the outlook and the profile of this recession, the real figure might be rather larger than 8 per cent of gross domestic product in terms of debt and we would start to get into areas of difficulty. The right hon. Member for Birkenhead (Mr. Field) warned about inflation, and I agree. In particular, if the pound is very soggy, we will import quite a lot of inflation and will end up with higher rates of inflation and a downturn—classic stagflation—which would be very difficult indeed.
	Like many Members, I have constituency cases. Some of the people I see who still have housing problems are those who were affected by the downturn under the previous Conservative Government and who perhaps lost their homes because of negative equity—that has a long-term difficult effect. One of the major changes in the British economy is that individuals carry a substantial amount of debt on their credit cards and mortgages—rather more than they might have done 10, 20 or 30 years ago. My real fear is that if unemployment increases beyond 2 million and towards 3 million, many of the people who lose their jobs will be carrying very heavy debts and will find that their long-term prospects are difficult. I welcome what the Government have announced on assistance with mortgages. It will be very valuable, because the long-term impact on many families who lose their jobs and find themselves with major debts against the home or against credit cards when they expected to have a major income will be horrific.
	What has happened in the global markets is that a lot of wealth has simply disappeared, because people do not know what many of the debts that banks hold are worth and there is no confidence within the market. That cannot wholly be filled by Governments, and a major adjustment will have to be made. The head of Barclays was probably right today when he talked about house prices falling 30 per cent., and the sooner prices fall so that we can get to the bottom of the market, the better it will be in terms of the economy's starting to readjust.
	One relevant factor is that whereas years ago first-time buyers used to get into the market at about 26, in recent years they have done so at 34 or 35. That is partly because of high house prices, but it is partly because of lifestyle choices—people getting married later and wanting to travel more; they want to go to Kathmandu and so on. When we get to a point where both the housing market adjusts to a lower level and those many young people are feeling more secure in their jobs because they have survived a wave of unemployment, there will be the prospect of people getting back into the housing market and our getting back to a more regular, sensible rolling housing market again. There is some hope, but the housing market has been distorted. A world in which the City paid out bonuses last year of £16 billion and where Russian billionaires buy properties in Chelsea has lifted a lot of the housing market in the south-east. Simply because people will not receive that level of bonuses in the next two or three years, the housing market will have to find a bottom. That will come when first-time buyers do what people have always done—get married and want to buy homes. I hope that the adjustment in the market is quick and that we get back to a more organised market, rather than have a slow fall, and it looks like that is happening.
	We have a very unusual recession. People have benefited over the past few years, because as house prices have increased they have been able to withdraw equity for homes, cars, holidays and sometimes for their businesses, but now we have reverse of that process. It will be very painful for those who lose their jobs—we hope that there will not be too many of them—and for all of us in dealing with the consequences of this very serious situation. I commend the proposals of my hon. Friend the Member for Tatton. I fear the worst, but hope for the best.

Harry Cohen: First, let me say a word about Afghanistan, because it feeds into this debate. It looks like we are going to commit more troops, and I say do not do it. Since the invasion of Iraq there has been a catalogue of failure, and we cannot really carry on as though the missed opportunity has not been missed, because it has. We are losing the hearts and minds of a growing number of the population, mainly because of the random bombing of civilians by our US allies. There has also been a chronic failure in terms of development, because infant mortality has risen—War Child's October report talked of a quarter of children dying before their fifth birthday, and that is the third highest level in the world—and the UN development ranking gives only three countries a lower ranking. We cannot afford an unproductive war such as this. Joseph Stiglitz's book called it "The Three Trillion Dollar War". That figure is likely to increase if we go down this path. Given the figures that the Select Committee on Defence has produced, and the cost trends and the extra troops, it is likely to be £5 billion a year, and we cannot afford that.
	This situation is compared with the 1920s and 1930s, and it is said that the war got the world out of the slump. That is a misreading, because at the end there was greater debt, massive asset destruction and countries were devastated. That took a long time to pay off, and there was a continuation of rationing. What is relevant is that the 1929 great crash also came from unbridled, uncontrolled capitalism. It led to a depression, massive unemployment, misery and hardship for millions, and from there, social upheaval and fascism. Fascism promoted rearmament, which put people back to work, but for conflict.
	Elsewhere, the lesson came from Keynes and Roosevelt that government can maintain employment by public works and the welfare state, but admittedly at a cost of increased borrowing and debt. However, it is not unreasonable to do that. In fact, it is essential. Local authorities built swimming pools, parks and halls, all paid for over 60 years, and it is okay that those benefiting from them years into the future pay towards them. So, it is not a case of putting future generations into hock.
	I am not opposed to a fiscal stimulus, and I think that the VAT cut was a clear signal to encourage trading. It is certainly more appropriate in this context than what the Tories propose—a council tax cut, which is irrelevant in this context. There needs to be more money for those on low incomes and on pensions, but the emphasis should be on capital programmes such as transport infrastructure, new schools, the NHS and new homes. The role of local authorities should be boosted, particularly in building new homes—the point has been made about council houses.
	It was right to take a stake in the banks, particularly the commercial banks, to provide stability and to implement our essential socio-economic agenda of getting funds to small businesses and home owners, but regulation needs to be substantially improved. There is no clearer example of that than today's story of Madoff, with his $33 billion fraud. The City of London is grossly inadequate in these terms. I wrote to the City at the time of the events involving Conrad Black and said, "You wouldn't have got a prosecution in this country, the way you are operating." Amazingly, the US is better than the City of London at getting prosecutions. I have not had a reply from the City.
	The Tories are still against regulation; their party wants the light touch, or no regulation, that brought us into this mess in the first place. The Tories use the level of debt and borrowing as a political argument to do nothing—laissez-faire economics—but it also goes further: it is the basis of a political position that says for the well-off, "Our share of the cake, whatever it is, is more important than maintaining or having a larger cake overall." That is an argument for inequality and it writes off a large chunk of the population as victims of unemployment or other aspects of the recession. The Tories leave them abandoned.
	There has been overdependence on financial services in the UK, but that has been made worse by the profiteers and speculators thinking of themselves as the lords of the universe who should not be subject to regulation because they are the wealth producers. That is combined with the Chicago school Friedmanites, who are determined, as an ideological doctrine, to eliminate and privatise the state. Naomi Klein has described that very well in her book, "The Shock Doctrine". The Tories have been the cheerleaders for both those schools of thought, and they have not changed.
	For the future, we need more on productive industry and less on financial services. The emphasis should be rebalanced that way. The bankers have been saved, but Woolworths staff have not. That is unfair. We must have an industrial strategy that protects productive jobs. We need control over who makes credit and in what way. The Government cannot abrogate that matter and give it to the private sector in an uncontrolled way. There needs to be tight control of fancy financial vehicles such as derivatives, which end up worthless. There needs to be accountability and transparency, including of offshore transactions. The state has to be the basis of stability and the guardian of the public interest. That cannot be left to the private market and its free-for-all, fraud and failure. Taxpayers must get their money back whenever the banks renew profitability. There must be no swift return to the privatisation of all profits. I say this: taxpayers are more likely to get their money back with Labour than with the Tories.
	The Bank of England recently estimated global bank losses at £2.8 trillion. The banks clearly need time for write-offs and state investment is buying that time. In the process, savings and shareholdings are saved from being at zero value, or worthless. It is appropriate for that to apply to the commercial banks—alongside, I might add, tighter regulation, an end to the bonus culture, requirements for them to do their job properly and a shift-out of the top level failures—but I am not convinced that it is so appropriate for the investment banks and hedge funds. By the way, Roosevelt did not want anything to do with them and would not make them legal.
	A principal factor about which I am concerned is the pension funds that those investment banks and hedge funds hold. They have been rendered worthless, but those institutions also have them at the end of the queue for payment. The state could take them over at what they are worth now, and then enhance them. Savings could be protected by the scheme that is in place already. However, we could let the rest of the banks—those investment banks and hedge funds—go down. It could be cheaper and fairer in the long term and it would remove that worthless, stultifying debt from the system, thereby allowing the chance for new capital to emerge. Those banks should look to their previous managers and owners in the courts to recoup their losses.
	Those are my feelings on the way forward.

Alistair Burt: It is always a pleasure to listen to the hon. Member for Leyton and Wanstead (Harry Cohen), even if we do not follow all his arguments all the time. Bearing in mind what he said, I wonder how he managed to sit on his hands over the last 10 years, as the very rich became even richer under his Government. No doubt he has an answer, and a charming one, as always.
	Just as a dog will ultimately take on the characteristics of its owner, or vice versa, a Queen's Speech tells us something of the character of a Government. A tired and rather thin Queen's Speech tells us a little about a weary animal that simply wants to pack up and go home to the fire. The rationale for this Government left when Tony Blair walked out of the door, and since then the Labour party has struggled to convince anyone that it had any intention of doing anything in government except be there to keep the Tories out. I must admit that that has a Machiavellian logic to it, but it probably is not what the public are looking for.
	Before I comment on the subject of today's debate, may I make a couple of brief remarks on other matters in the Queen's Speech? The snappily named Local Democracy, Economic Development and Construction Bill legislates for, among other things, the transfer of planning powers from the unelected regional assemblies to unelected regional development agencies. I have not met anyone connected with regional development agencies who wants those powers. They see them as a poisoned chalice and a way for the Government to get out of their failed regionalisation policy. I hope that the Bill perishes either in the Lords or here.
	The policing, crime reduction and airport security Bill will, among other things, finally provide coherence in the provision and costing of airport security, but not before some £2 million has been lost to Bedfordshire police due to the Government's decision four years ago to cut expenditure on Luton airport—a major national port of entry and departure with obvious security interests. The Government's inexplicable decision to cut the funding and ask Bedfordshire police to take up more of the burden has increased costs for a hard-pressed police authority. A lot could have been done with that £2 million, and I hope that during the passage of the Bill an amendment will be carried that provides a suitable vehicle to repay that cost.
	Although the Government's continuing efforts on welfare reform are belated, they are to be commended. The Government seem to be accepting some of the analysis that my Opposition colleagues advance consistently, and which Labour Members, most notably the right hon. Member for Birkenhead (Mr. Field), occasionally mention. As a former Minister for disabled people, I welcome the improvements to the access to work scheme. Those improvements, as well as the improvements to ensure that those with disabilities have rather more control over their own lives, follow the path laid down so well by Sir Nicholas Scott during his tenure in that important post. I am pleased to see those developments continued by the Government.
	Two further points on welfare reform are worth mentioning. First, any social welfare reform now carried forward without being fully informed by the work of my right hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith) and his Centre for Social Justice will be off track. His comprehensive pulling together of so much statistical information on our damaged communities has done much to mould opinion in recent years and to help us recognise that attempts to move people from benefits into work and to promote economic independence cannot achieve success unless they are accompanied by an understanding of the extent of family and relationship breakdown and of its impact on communities.
	Any time spent with those who work on the front line of a country that now exhibits clear signs of social apartheid suggests that while a fortune is spent on the consequences of family and relationship breakdown, too little is spent on supporting relationship structures in the first place and trying to prevent their breakdown later, particularly when children are involved. As recent court cases have further revealed the depth of that brokenness, we need somehow to find national consensus on tackling a problem that will last, Government in, Government out, over the next 50 years. I suggest that my right hon. Friend's work provides an excellent basis for that.
	Secondly, I would be interested in seeing an amendment made to the welfare reform Bill. When I visited a community furniture re-use project in my constituency recently, the organiser raised the issue of community care grants. The project deals with a number of clients with addiction issues. When community care grants are paid in cash, there is an understandable temptation and risk that they will not be used for the purpose intended. My local project has suggested to the regional Jobcentre Plus that vouchers should be given rather than cash, and those involved in the project believe that vouchers are in use in some part of the country. The response from the regional Jobcentre Plus was that to give cash to some individuals and not to others would be rather unfair.
	During the passage of the Bill, I wonder whether the Government might consider running some more pilot projects, relegating the concept of "fairness" and giving preference to an understanding of the individual needs of a client. Individual decision making on whether to give money or a voucher to someone who is addicted might require them to be given a voucher, which would be better all round. I would be grateful if the Government could think about that.
	Finally, let me move on to the economy. It is clear from many speeches made by Members of all parties that, whatever the intentions of the Government and Whitehall, the financial injection into the banks is not getting through as we would have intended. The chamber of trade in Biggleswade tells me that banks are approaching business customers to tell them that even as base rates are reduced they are holding businesses to the rates of interest on their loans or credit facilities that were originally agreed. There is a widespread belief, notably shared by the right hon. Member for Birkenhead, that little has been added through the £12.5 billion spent on VAT reduction. Most constituents are aware of price reductions elsewhere, as businesses adopt the traditional practice of dropping the price to sell the goods.
	There is a further pressure affecting recession in areas such as North-East Bedfordshire. Earmarked for significant building in the future, the area has now a large number of building schemes that are now at best on hold or might be shelved. In addition to the schemes, the section 106 funding that goes with them has been taken into account in the local authorities' plans. If the section 106 plans fall foul of the economy's collapse, the agreements will either be renegotiated or lost and local authorities will find themselves looking for new money to fulfil promises that they have already made to the community. Under the straitened circumstances that they are in, they will be unable to do so. That will put further pressure, which is currently rather underrated, on local economies.
	The Government's attitude to the fall in the exchange rate is puzzling. I have twice attempted to ask both the Prime Minister and the Chancellor of the Exchequer what they believe to be the reasons for the fall in the value of sterling over the past few months. My questions, and those of others, are now met by a standard reply, which is that the Government do not give a "running commentary" on the value of the exchange rate. That is not what we are asking for. Asking for an explanation of what has happened is not the same as asking for a running commentary on what is happening now or might happen tomorrow. The now Prime Minister worked that out when he was shadow Chancellor, when he said that a weak currency was evidence of a weak Government. The probity of asking about the value of exchange rates did not worry him then.
	There are three answers to the question. The first is to say that the world has got things completely wrong, that it is misjudging our economy and that everything is dandy. To say that while praising the rest of the world for ostensibly following what the Government are doing would put the Government into difficulties, so that answer is not given. The second answer to the question of what has happened to the exchange rates is that there has been a snap answer to a series of sudden problems in the British economy; things will pick up next year and people will realise that they have made a mistake. That is not a bad answer, but it indicates that there are some problems at present, so it is not an answer the Government give. The third answer is that the world is completely right: we are in a total Horlicks, the judgment is correct and we are very sorry. That is the right answer, but again it is unlikely to be given. Any of those three answers would be better, however, than simply saying, "We are not giving a running commentary." Perhaps the Minister who replies to the debate might be given the opportunity to answer the question.
	As a nation, as individuals or as a people, the answer to the economic crisis cannot be that we should just go back to where we were. We cannot ask people to return to over-borrowing, not saving and being offered money that they cannot afford to take. They must not be urged to buy things they cannot afford. Consumerism as the answer cannot be where we want to put people after all this is over. Whatever reflections there are after the recession, one of them will surely be to try to understand that the concept "enough" should mean more to us than the concept "more". At some stage, we shall have to face that as a nation, rather than being asked to go through this whole cycle again.

Lyn Brown: I shall consider some of the means that we need to adopt if we are to eliminate child poverty in the United Kingdom by 2020, ensuring that the Government's ambitious aim becomes a reality for the people on low incomes whom I represent. The Government are rightly proud of their progress in tackling child poverty thus far, but I fear that in the capital there is still much to do. At present, one in four of London's children live in poverty, almost twice the national average: 650,000 children—a figure equivalent to the entire population of Sheffield.
	London is a wealthy city, but that wealth and strength is in massive contrast to the entrenched pockets of deprivation that can be found across the capital. To achieve the child poverty target, co-ordinated cross-departmental action is required. We need a London strategy if we are to reach our target, as the capital faces a unique set of challenges: high rates of worklessness, staggeringly high housing costs and a relatively low skills base. Additional challenges are posed by a highly transient population—transient through necessity, not choice.
	The national minimum wage has had a real impact on reducing child poverty across the country. It was a just and morally right policy to pursue and has resulted in positive advancement for many workers and families. However, I fear that the national minimum wage has not had the same impact for Londoners. Many of my constituents work their guts out for the minimum wage, which is peanuts in an area where the costs of housing, day-to-day essentials and child care are so very high.
	The notional hourly rate of the London living wage is £7.45, but at present about 10 per cent. of full-time workers and a massive 45 per cent. of part-time workers do not receive that rate. The issue needs to be addressed. My next point will be controversial, but we need a debate on whether we should consider the introduction of regional differentiation in the minimum wage to address the needs of the capital. Wage rates matter when we are trying to deal with poverty.
	I listened with great interest to the contribution of my right hon. Friend the Member for Croydon, North (Malcolm Wicks). I represent constituents in a borough where the challenge from long-term worklessness, ill health and disability is as entrenched as anywhere in the country. Nearly 7,000 people in my borough have been receiving incapacity benefit for more than five years, and 4,710 receive IB as a result of mental disorders. It is right to remind the House that Department for Work and Pensions research on the pathways to work pilot found that
	"the most important factor in finding work was how health conditions were perceived and managed."
	The research also found that the imposition of sanctions—not work per se—worsens existing health problems, provokes new mental health problems, has a worse impact on the most deprived and isolated people and rarely improves positive engagement:
	"Pathways In-Work Support advisers commonly identified customers with mental health conditions, such as depression and anxiety or low self-confidence, as the most significant customer group".
	That document goes on to describe a series of representative cases in which people have struggled to take on work, have been exhausted, panicked, and drained of confidence, and have sometimes failed. For those with physical health conditions, the dominant issue was managing to fulfil their work obligations without experiencing pain or worsening their health condition. It was reported that clients often develop mental health or emotional difficulties such as depression or low confidence as a result of their poor physical health and the impact on other aspects of their life.
	I applaud the White Paper's support for a vision of personalised conditionality, matched by personalised support. I cannot emphasise too much the importance of cross-Government working to explore how we can integrate health, work and skills services for people with mental health conditions.
	As I am sure that the majority of Members would agree, adequate, safe and affordable housing is essential for good mental health, and central to the fight against child poverty. The announcement of an £8 billion programme last summer to deliver 180,000 affordable homes has given hope to many young families. Families living in grossly overcrowded homes often fail to thrive. Many tensions are created and the children struggle to keep up at school.
	I am concerned that the Mayor of London may prioritise public subsidy of low-cost home ownership projects. I accept that many families in my constituency aspire to become home owners in future, but Housing Corporation research shows that London has a surplus of those projects, with almost 10,000 shared ownership properties standing empty in London because Londoners cannot afford to buy them and the banks will not lend on them. In monetary terms, that represents more than £600 million-worth of public investment currently doing nothing to help the homeless and overcrowded families who need it most.
	While I am on the subject of overcrowding, I would like to remind the Government of the promise, made during the progress of the Housing and Regeneration Bill, to introduce secondary legislation to change the definition of overcrowding to a bedroom standard. The Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Hartlepool (Mr. Wright), committed to introducing such secondary legislation. Committee members were told that secondary legislation could be introduced in 2009. Well, 2009 is upon us.
	Having encouraged the new Minister for Housing, who attends Cabinet, to act on overcrowding and home building, I urge her to assist the Government in their aim of poverty eradication. I also ask her not to consider any late amendments to the Bill that would downgrade the security enjoyed by council and housing association tenants. Stories in the press suggested that she might do that. Perhaps the stories were placed to bounce my right hon. Friend into backing plans to scrap secure and assured tenancies, but thankfully, the lady was not for bouncing. My hon. Friends and I were greatly reassured by her willingness to dismiss those back-door briefings as
	"speculation ... to put it mildly."
	She has pushed back the publication of the housing reform Green Paper until next spring, and that shows that she has a grasp of the real issues to do with tenancies and worklessness.
	John Hills's detailed research, published last year, made it clear that the reasons for disproportionate rates of worklessness among those in social housing are complex and manifold. Anyone who doubts that need only look at how much higher the rates of worklessness are among homeless families placed in non-secure, expensive temporary accommodation. Housing benefit often drives people further from the job market and deeper into the poverty trap. That is why I welcome the commitment by my right hon. Friend the Secretary of State for Work and Pensions to undertake a housing benefit review to look into the difficulties associated with the housing benefit taper. The consequences of no reform in that area will certainly have a negative impact on the Government's commitment to halve and then eradicate child poverty in London.
	Before arriving in the Chamber today, I had an extremely productive meeting with the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Burnley (Kitty Ussher), in which we discussed that very issue. I am grateful to my hon. Friend for her time and her intelligent analysis of the extremely problematic issues. I am genuinely hopeful that a solution will be found to help families who cannot afford both to work and to keep a roof over their heads, and the heads of their children.
	My contribution today has, of necessity, been short, and short contributions can mean that arguments are not fully developed. However, I hope that I have highlighted some of the challenges and complexities that will need to be addressed if we are to ensure that the Government meet their commitment to eradicate child poverty by 2020.

Andrew Pelling: It is important that we debate that issue on the day on which the extent of the Madoff scandal and fraud has come to light. At over $50 billion, it is much bigger than the amount of the fiscal stimulus proposed by the Government. To provide confidence in the hedge fund industry in the UK—my hon. Friend is right to emphasise the fact that the crisis is attacking the financial industry here in London—it is important that proper work be done as a matter of urgency to audit hedge funds in the UK.
	The Government try to make a great merit of the importance of fiscal stimulation. I strongly believe that the fiscal approach must be the premier approach compared with monetary policy, but fiscal stimulation must be more effective than the 5p reduction in VAT on the £2.35 price of a Costa coffee. The reduction in VAT to 15 per cent. has a minimal effect on the price of the coffee. Normally, one would expect to buy nine coffees before being given one free, but now one must be particularly hyper, consuming 47 cappuccinos at £2.30 each before seeing a tangible return on one's discounted morning pick-me-up. Perhaps that is what the Government meant by stimulating the economy.
	Unfortunately, the figures that the Government face in the crisis are serious. Despite the determined way in which Ministers have acted since the crisis fell upon them in the autumn, someone was definitely asleep at the wheel when it came to regulation. UK bank assets more than doubled—up 125 per cent. in seven years—and one of our leading banking institutions had a leverage rate of 60:1. The Government make bold statements about the fact that it is their intention to ensure that the extent of lending in 2007 is maintained but, unfortunately, that is a quixotic aim, because it was the securities market—securitisation—that provided liquidity for the economy, and we must bear in mind the fact that over the past seven years, the amount of annual liquidity provided to the markets by UK securitisation rose from £13 billion to £257 billion, so £240 billion a year has gone out of the lending market as a result of the destruction of the securities market. We must acknowledge just how challenging the Government's task is. It is difficult to criticise the banks for not lending when one realises that they are in fact lending more, but the securities market has been destroyed, so what we as Members of Parliament see at constituency level is a huge contraction in the credit supply.
	The Government need to think carefully about how they set about providing additional liquidity. I am disappointed by the announcement today by the Government that it is their intention to extend further Government guarantees for the public issuance of debt by banks. It must be remembered that British banks using the guarantee are issuing that debt at the equivalent of 1 per cent. more per year in interest rate costs than the equivalent LIBOR gilt yield rates.
	That has the effect of greatly increasing the cost of that money to the Government. It would be better for them to secure funding for the UK banks 1 per cent. more cheaply through issuing gilts directly, and lending that money directly to the banks. That would give the Government greater control over the banks, which we as Members of Parliament crave, and would not allow the standing of Government debt to become so debased by being issued at the ridiculously high rate of LIBOR plus 90 basis points.
	If the £250 billion that the Government intend to allow the banks to borrow using the guarantee of Her Majesty's Government, we could theoretically save 1 per cent. a year on that borrowing by deciding that that borrowing should be issued directly through gilts. Over the three-year period that these bonds are allowed to be issued, that would save a total of £2.5 billion, which could be better spent on schools or hospitals, or perhaps even paying for a minute part of a further recapitalisation of a bank. It must make sense in the context of the approach that is being taken. I had a great deal more to say, but many other Members wish to speak in the debate, so I am happy to conclude now.

Mary Creagh: It is a pleasure to speak after my hon. Friend the Member for Coventry, South (Mr. Cunningham), who represents the area where I went to school in the 1980s. My family weathered the terrible recession of that time and saw the devastation of the car industry—the plant at Massey Ferguson, the Alvis tanks factory and the car body factory were all closed.
	A series of devastating public sector spending cuts resulted in teachers' strikes, and many of my friends and I missed out on large parts of our education. Opposition Members perhaps have not suffered a teachers' strike, but when that happens, children go into school at the beginning of the week, pick up their work for the rest of the week, do it quickly that afternoon and go off to play for the rest of the day. As a 12-year-old, it was a recipe for happiness, but I am sure that it had a devastating and long-lasting impact on many of the people with whom I was at school. I would also like to share the fact that in 1982, I had to buy my own O-level physics textbook. In 1982, £12 was a lot of money for a 14-year-old who earned £1.50 from a paper round. Many of us can remember other recessions. The recession of the 1980s was perhaps not as desperate as that of the 1930s, but there was 20 per cent. unemployment in Northern Ireland and 16 per cent. unemployment in north-east and north-west England.
	I shall consider two issues: the temporary reduction in VAT and, if time permits, the welfare reform proposals. The Government have done the right thing with the temporary cut in VAT because it will reduce prices and improve consumer spending. The measure is not about people buying 25 cappuccinos, as the hon. Member for Croydon, Central (Mr. Pelling) rather facetiously implied, but about 25 people who would not otherwise buy cappuccinos doing so. We need to allow people to keep making the discretionary expenditure that they would otherwise not make. Increasing the higher rate of income tax to 45 per cent. for those earning above £150,000 is a bold, positive and progressive move by the Government that will ensure that the pain of this recession is shared by the few, as well as the many—to paraphrase a famous new Labour phrase.
	It is important to bring forward spending on large infrastructure projects because that will enable construction companies that have been badly affected by the recession to remain in business. It is crucial that £3 billion is invested in our motorways, social housing, schools, hospitals and energy efficiency. The phrase of the hon. Member for Tatton (Mr. Osborne) that we did not fix the roof while the sun was shining has become rather hackneyed, but I can tell him that, as a Labour Government, we have invested money in repairing schools and hospitals. Again, Opposition Members might not have had the pleasure of going to an outside lavatory at their school—I am sure that the Eton Rifles and the Bullingdon boys were not allowed to do that—but in some schools, the classrooms were out of action for years at a time because of leaks in the roof.
	At Pinderfields hospital, Wakefield, which I visited two weeks ago with the Secretary of State for Health, a £250 million contract has been put in place and the infrastructure—the bones of the hospital—are in place. That hospital had not received any major building investment since almost the second world war—and that investment had consisted entirely of prefabricated portakabins. When I visited to celebrate the NHS's 60th birthday this summer, we went to a children's ward where the beds had previously been lost because the rain was getting through a hole in the roof. That is one of the challenges that doctors, nurses and care professionals in Wakefield faced in delivering health services, but now we are talking about the roof in Pinderfields hospital being physically fixed through a £250 million investment from the Government.
	Last week, my right hon. Friend the Secretary of State for Children, Schools and Families announced new money for play areas. Wakefield will receive £1.1 million of investment this year, rather than in 2010-11, in 22 areas. In Kirklees, which I also represent, and the wards of Denby Dale and Kirkburton, £2.2 million will be invested in 28 play areas and two adventure playgrounds. I am determined not to let the Tory-Lib Dem coalition on the council allow my rural children to miss out.
	It is also good that we are providing £15 million for free debt advice, which has been an issue in Wakefield. People trying to access debt advice at Wakefield's citizens advice bureau currently face a three-week wait, which I raised with Treasury Ministers in the House in October. That demonstrates the nonsense of the Opposition, who published a paper in the summer calling for the deregulation of the mortgage market. We are all now only too aware of the dangers that such an approach would bring.
	I have only 20 seconds left, so I will miss certain sections of my speech, but I want briefly to mention welfare reform, which is vital. It is difficult to get people back into work during a recession, but we cannot allow worklessness to become an ingrained habit, as the Conservatives did in the '80s and '90s. They want spending cuts, but I say that it is better to increase the national debt than to have 200,000 people losing their homes or one in 10 people unemployed. It is better that the national debt should rise than that entire sections of the manufacturing and coalmining industries should be left to wither on the vine: doing nothing is simply not an option. We in the Labour party have an action plan. Only time will tell whether it will be enough, but the "no action" plan from the do-nothing party would seriously let down the people of this country.

Mohammad Sarwar: The UK and, indeed, the wider global economy are entering an exceptionally difficult and uncertain time. This global economic downturn has, in one way or another, affected the lives of many businesses and families throughout the world, including those residing in the United Kingdom. Although the problem started with the sub-prime housing market in the United States, globalisation caused the problems to spread quickly and to affect the world economy, placing a tight squeeze on the availability of credit. That has resulted in the collapse of several major international financial institutions, and an accompanying collapse of market confidence. Unprecedented sums of Government finance have been provided to assist in the recapitalisation of our banks. At the same time, mortgage approvals and lending in general have declined, and home repossessions are on the increase. Interest rates for businesses and families are still fairly high. Lenders are slow to pass on their cuts to consumers, and when they finally do, they do not pass them on in their entirety.
	Furthermore, a substantial number of small businesses say that their overdraft charges are higher than they were a year ago despite central bank rate reductions. Interest rates for loans, credit cards and store cards are typically very high, and have remained so despite the recent rate cuts. All that has compounded the problems of a slowing property market that is also currently suffering a decline.
	The pre-Budget report set out a positive and much-welcomed plan of action in the shape of the substantial £20 billion fiscal stimulus package to be introduced between now and April 2010 to counter the effects of the recession and aid the economic recovery. The package includes a permanent £600 increase in the income tax personal allowance, a temporary reduction in VAT, no significant changes in vehicle excise duty until after 2010, the bringing forward of child benefit and child tax credit increases, and a one-off £60 winter payment to pensioners on top of an increased winter fuel allowance payment.
	I commend the Government for having addressed some of the key economic issues. They have provided greater protection for bank depositors by guaranteeing deposits of £50,000, reaffirmed the commitment to investment in public services, and taken steps to pump liquidity back into the market. I also welcome the introduction of the new charter for mortgage holders, announced last week, which is designed to prevent hard-working families from having to face the fear of home repossession.
	The charter provides three practical safety pillars for home owners: an agreement by the banks to hold back repossession proceedings until three months after the home owner falls into arrears; a new pre-action protocol making it clear that repossession is to be pursued only as a last resort with free debt advice available in every court and judges expecting lenders to exhaust all other options first; and the opportunity to defer a proportion of interest payments for up to two years, with the Government guaranteeing banks against the risk of loss from such deferred interest payments.
	The charter has been welcomed by market specialists, and is testament to the pledge of my right hon. Friend the Prime Minister to provide real help for families during these very difficult times. In contrast, the Leader of the Opposition has shown that not only does he not understand the nature of the economic problems, but he does not care about lessening its possible effect on families.
	However, we must be prepared to go further in our efforts to assist businesses and families. We must ensure that the banks play their part in meeting the needs of consumers in what is proving to be a very demanding time for our economy. At present they are failing to do so, as they have not resumed lending to the levels seen before the credit crunch. They have also been unwilling for a second time to pass the full amount of the Bank of England interest rate cuts to consumers. My right hon. Friend the Prime Minister has rightly said that that is unacceptable. It is reassuring to see a new lending panel chaired by the Chancellor and Lord Mandelson set up to monitor lending levels, but, given the emerging evidence that overdraft limits for small businesses are being reduced and, in some cases, withdrawn completely, it is more essential than ever for us not to allow viable businesses to fold owing to a lack of credit.
	We must take a more robust approach. The banks should be fully aware that if they fail to act in accordance with the strings attached to their rescue plan, we will seriously begin to consider some of the suggestions recently made by market specialists to the Treasury Committee. They include introducing credit market control measures and appointing Treasury officials to sit on banks' executive boards. I am not a fan of bank nationalisation, but if the banks do not behave, the option of full nationalisation should be adopted to make them start lending again.

Roberta Blackman-Woods: I shall endeavour to keep my remarks brief, but I want to say a few words about the economic measures outlined in the Queen's Speech and the pre-Budget report, and also to touch on other key issues in the Government's programme.
	I think there is consensus on the fact that we are in very serious economic times, but there certainly is not consensus on how to deal with that. I strongly support the Government's commitment to act decisively to make sure that we enter economic recovery as soon as possible. That is in stark contrast to the approach of the do nothing Tories. The Government are offering real help for those who are being affected by the economic downturn, and I especially welcome the measures aimed at families, pensioners and small businesses, such as the £60 pensioner's payment, increasing child benefit, more loans and deferred tax payments for small businesses, bringing forward £3 billion-worth of capital projects and, more recently, credit card protection. I know that that will be welcomed by my constituents, many of whom have recently come to my surgeries to talk to me about the actions of credit card companies.
	That is all real action to help. Apparently, however, the Tories would rather we followed their path and did absolutely nothing. We in Durham still remember the "unemployment is a price worth paying" Tories and we do not want them back. At a time of economic hardship, a great deal of attention is rightly focused on how to deal with economic problems, but we must also pay attention to the role that public spending can play in reducing unemployment.
	My hon. Friend the Member for Leyton and Wanstead (Harry Cohen) was right to focus on the role that public spending can play in providing infrastructure. We need this investment in infrastructure to continue. In Durham, we are currently consulting on the building of two new schools; one is to serve Durham city and is jointly sponsored by the county council and the university. This is a necessary investment for the future, not wasteful public expenditure as the Tories would have us believe.
	Education is crucial to economic development. From Sure Start for pre-schoolers through the school system and on to apprenticeships and university courses, we must continue investing in training and education, because that prepares our young people and adults for the future economy. That is why I very much welcome the Government's children, skills and learning Bill, and in particular the attention that is being put on apprenticeships as a key measure in helping engage young people and adults in training, to improve their chances of employment in our future economy.
	The Government have high aspirations for every child in the country. By providing better education and training, they are challenging the underlying causes of poverty and helping children and young people to raise their own aspirations. It is essential that we reduce the educational attainment gap; it must be closed if social mobility is to be improved.
	I want briefly to take issue with my right hon. Friend the Member for Birkenhead (Mr. Field) on training. That is essential. We should not rule out "make work" schemes as part of welfare reform, but they should not replace any emphasis we place on training.
	The Government's work on child poverty has been leading the world. The child poverty Bill will enshrine in law historic commitments to eradicate child poverty in a generation. That is much welcomed. In passing, I note that the Conservatives have refused to make any real pledge on ending child poverty.
	Local initiatives and regeneration are crucial to tackling poverty and improving economic regeneration, so I welcome the Local Democracy, Economic Development and Construction Bill, and I hope that it ensures that local authorities can be much more active in economic development in their area.
	Finally, I want briefly to thank the Government for putting into the police and crime Bill measures to give local people a greater say over whether to have lap-dancing clubs in their area, and I hope to be called to say more about that on a future occasion.

Chris Grayling: This Queen's Speech has all the hallmarks of a Government who have been in power too long. It has all the characteristics of a Government who have run out of ideas, and we now have a set of Ministers who no longer have the ability to distinguish between the national interest, their party interest and their own personal interest. At a time of national crisis, we have a Government who are solely interested in securing their own re-election. Never has that been more apparent than during this year's debate on the Gracious Speech.
	What we have is a motley collection of Bills assembled not through some great vision of a different future for our country, but out of pure political expediency, such as the child poverty Bill. We all share the goal of eliminating child poverty and we will support the Bill, but we all know why the Government have chosen this moment to bring the measure forward. They hope that by setting in statute a child poverty target for 2020, we will all now forget that they have effectively abandoned their child poverty target for 2010. Well, I tell them today that we will not let them get away with that one.
	Then there is the welfare reform Bill. We all share the goal of radical reform for our welfare state, but we know why the Government have chosen this moment to bring forward that measure, as well. They hope that by rushing to copy Conservative welfare policies, they can deny us an opportunity to challenge them over their wasted decade: 11 years when the number of young people not in education or employment has risen, not fallen; when most of the millions of new jobs they are always reminding us about have gone to migrant workers, not to British people living on benefits; when countless billions of pounds have been thrown at the social problems we face and have made virtually no difference; and when in the good years, the Prime Minister blocked radical reform, when so much more could have been done. Well, we will not let them get away with that one, either. As the hon. Member for Glasgow, South (Mr. Harris) said on his now famous blog last week,
	"what a pity we weren't more radical in our first or second term."
	So instead, what do we get? We get a Gracious Speech that is little more than a diversion; bad news buried; unpopular plans dropped; good ideas pinched; and embarrassing failures masked by high-sounding announcements about the future; and a Gracious Speech with only a handful of measures, compared with those we have come to expect from this Government. This was not a plan for our futures—it was a public relations exercise, and a pretty poor one at that.
	Of course, there is another reason why the Government have so little to say at the moment. They have finally run out of money, and now they just do not know what to do. All the promises they made have come to nothing. Just look at what they said in the last two Gracious Speeches. In 2006, they promised to
	"maintain low inflation, sound public finances and high employment."—[ Official Report, House of Lords, 15 November 2006; Vol. 687, c. 1.]
	In 2007, they promised
	"policies to secure a stable and strong economy, with...sound public finances, and high levels of employment."—[ Official Report, House of Lords, 6 November 2007; Vol. 696, c. 3.]
	Two years later, we have the truth. The national debt is set to double within five years. Even the Treasury admits that unemployment is set to rise sharply. The pound has fallen to its lowest level against the euro, leaving millions struggling to afford their family holiday this summer, and now the Government are floundering in trying to find a response. One week, they are promising major new projects to try to ease the impact of economic downturn; the next—in the last few days—they are doing just the opposite, saying that major projects will now have to be delayed.
	One of the most breathtaking pieces of hypocrisy that we hear every week from this Government is when they claim that it is their opponents who are inconsistent. This is a Government who say one thing one week, another the next, and a third the week after. Then they stand in front of this House—it is the Prime Minister who is the worst offender—and make claim after claim that would fail any polygraph test that has ever been invented. Most extraordinary of all, the Prime Minister stands up in front of this House and claims to have saved the world. Now he may say it was a slip of the tongue, but we know that he really believes it. Well, I have news for him. It is not just the German Finance Minister who thinks that that is a load of old kugeln. The list of independent international observers who think that Britain is very badly placed indeed to weather the current downturn is getting longer and longer.
	However, let us not go overseas for a straightforward view about the Government's policies. This, from one leading observer, was in  The Daily Telegraph on Saturday:
	"Worse still, few people believe that Gordon Brown's strategy to mitigate the impact of a mega-recession on jobs is likely to work. The Government has dangerously raised the stakes by borrowing an additional £20 billion to finance its VAT cuts. What is the sense of this policy when firms are rushing to cut prices by up to 50 per cent? A 2.5 point cut in VAT is simply spitting in the wind of the economic hurricane that is gaining strength."
	Members who were in the House earlier might recognise those words, because they were repeated—they are from the right hon. Member for Birkenhead (Mr. Field), a Labour Member of Parliament.
	If Labour Members are so confident about the state of our economy and about the viability of the measures unveiled in the pre-Budget report, I ask them to explain two things. Why is the pound falling sharply against the currencies of other countries? Why do they think it will be British people who will be paying more for their holidays this summer—if they can afford them, that is? Back in 1995 the Prime Minister certainly had his own view about a falling currency, when he said:
	"A weak currency is the sign of a weak economy, which is the sign of a weak government".
	Never was he more right about that than now, and the markets agree. Why do Labour Members think the international credit markets now view Britain as less credit-worthy than McDonald's? Could it perhaps be that the world outside now looks at the Prime Minister as being more Clark Kent than Flash Gordon? Our pensioners certainly view him that way. The most immediate victims of the sharp falls in sterling are British pensioners who have chosen to retire overseas. For them, a weak Government really have led to a weak pound, and they are all paying the price for this Government's failure in a very real way.
	Then we must consider the savers. Why have this Government so little to say about the fortunes of savers? As interest rates are slashed to try to respond to the economic failings of this Government, what have Ministers to say to those who are seeing their retirement incomes slashed as well? The answer is nothing, not even words of comfort. Indeed, when I appeared alongside the Minister for Employment and Welfare Reform on the BBC's "Politics Show" a couple of weeks ago, it was worse than that, because he was just plain dismissive of the challenge our savers face, and he is the No. 2 Minister in the Department that is supposed to be responsible for the welfare of older people. Ministers would not even take steps to suspend the annuities rule for those pensioners being forced to make long-term commitments in a turbulent market.
	This week, there has been yet another insult to the very large number of pensioners who lost money in Equitable Life. The ombudsman's ruling could not have been clearer; the Government have an obligation to respond. The Prime Minister promised a full response by Christmas. So what happened last week? The promised statement was kicked into the long grass of the new year. Ministers say that they will be doing something then. Well, I have a message for all those pensioners: I would not trust this Prime Minister further than I could throw him, and nor should they.
	I say that because what we have today in Britain is a Prime Minister who quite simply cannot be trusted. He leads a set of Ministers who deliberately misuse national statistics to win themselves favourable headlines, who systematically, week by week, in this House misrepresent the views of those who dare to oppose them, and who no longer originate ideas, but just copy the best from their opponents. This is a Government who have one single overriding objective: to hold on to the trappings of power, no matter the consequences for the future of this country, for those stranded on lengthening dole queues, for the people who have built up and nurtured businesses that create employment for millions and for those who have put aside money for retirement and now find themselves squeezed and squeezed.
	This Gracious speech does not offer a way forward to a better Britain. It contains no ideas about how to stem the tide of recession and begin to rebuild wealth and sustainable employment for all our futures, and no ideas about how to tackle the social breakdown affecting so many parts of our country. It no longer contains principles and philosophy; it just plagiarises the Government's opponents in the hope that they can be denied political advantage. It is about one thing, and one thing alone: power. Well, I say to Ministers tonight that Britain deserves better. When a Government no longer have a vision for the country they seek to lead, when a Government no longer have fresh ideas to bring to bear on the challenges we face and when a Government are more interested in holding on to office than in using it for the advantage of every citizen in this country, it is time for them to go.

Andrew George: I am pleased to have secured this debate on the regulation of the grocery sector, and that the Minister is here to respond to it, as he knows my well established interest in the subject as a result of a parliamentary question that I asked him on 23 October—column 443—and of a Westminster Hall debate on 13 May this year, in which we had the opportunity to debate the role of supermarkets in the grocery supply sector.
	I shall first paint a picture of the subject's background. My hon. Friend the Member for South-East Cornwall (Mr. Breed) deserves an honourable mention at this stage, because he was the author of a report, "Checking out the supermarkets", which was published in 1998, and which was a precursor to a request in April 1999 by the then director general of fair trading to refer concerns about the practices of supermarkets to the Competition Commission. The commission produced a report in October 2000, entitled "Supermarkets: A report on the supply of groceries from multiple stores in the United Kingdom". In September 2003, the Competition Commission produced a report on the Safeway merger. Following the commission's original report in 2000, which set up the supermarket code of practice, the 2004 report from the Office of Fair Trading was the first attempt to review whether the code of practice was effective. Because of the inconclusiveness of the first report, a second was produced in March 2005. As a result, in 2006 the OFT referred supermarkets to the Competition Commission again.
	In July 2006, I was privileged to be able to call together a wide range of non-governmental organisations and interest groups including Friends of the Earth, the Association of Convenience Stores, the British Brands Group, the British Independent Fruit Growers Association, ActionAid, Traidcraft, the National Farmers Union of England and Wales, the National Farmers Union of Scotland, Banana Link and Breaking the Armlock in what we called a cross-cutting group, because it was covering a number of subjects that were relevant to the Competition Commission inquiry. We submitted a proposal, which I had supported for a number of years, for not so much an independent food trade regulator as an adjudicator.
	On 13 March this year, following the provisional findings of the Competition Commission's inquiry, I went to give further evidence to the commission along with Michael Hutchings, a lawyer supporting the cross-cutting group, and Robin Tapper, representing the NFU. I was pleased that on 30 April 2008, the commission's final report on the United Kingdom grocery market included proposals for the strengthening of what was then known as the supermarket code of practice to become a reinforceable grocery sector code of practice and for the establishment of a supermarket ombudsman, for a number of reasons which I shall explain in a moment. The Government responded on 29 July; the Minister may well comment on that.
	We need to be clear about the Competition Commission's powers under the Enterprise Act 2002, as proposed by Government and agreed by Parliament. Section 134(1) states that the Competition Commission shall decide whether any feature of the market restricts or distorts competition, which is described as
	"an adverse effect on competition".
	Section 134(4) states that if the Competition Commission decides that there is an adverse effect on competition., it must also decide whether action should be taken by it to remedy the adverse effect or whether action should be taken by others, and, in either event, must decide what action should be taken. Section 134(6) states that the commission must try to
	"achieve as comprehensive a solution as is reasonable and practicable".
	Section 134(8) states that when deciding on these remedies the commission may have regard to likely customer benefits in the form of
	"lower prices, higher quality or greater choice of goods or services".
	According to paragraph 3 of the Competition Commission's final report, published on 30 April—this is a crucial quotation—
	"the transfer of excessive risk and unexpected costs by grocery retailers to their suppliers through various supply chain practices if unchecked will have an adverse effect on investment and innovation in the supply chain, and ultimately on consumers".
	It proposes the two remedies that I mentioned earlier—a change in the supermarket code of practice and the establishment of an ombudsman. Paragraph 5 states:
	"If we cannot secure suitable undertakings from these grocery retailers, we recommend that Government takes the necessary steps to facilitate the establishment of the Ombudsman."
	The report devoted 90 of its 270 pages to the description of the remedies. It therefore cannot be said either that the remedies were not a substantial element of the report or that the commission treated the issue lightly.
	Obviously, we were keen to hear what the Government had to say. On 29 July, they said in a press release:
	"If it cannot get agreement the Government will consider establishing the ombudsman itself. The Government would make an assessment based primarily on what would be in consumers' best interests".

Andrew George: I am grateful to the hon. Gentleman for that—or perhaps I should call him my hon. Friend, as on this issue and many others he has been an assiduous and strong campaigner. It would be helpful if the Government were to give a strong steer on this issue, either this evening or soon. Otherwise, there will be a long and painful process of attrition. It will be most painful for the suppliers and the primary producers in this country and worldwide if we do not achieve the desired result as soon as possible.
	On behalf of the cross-cutting group, we commissioned Professor Roger Clarke of the Cardiff business school to look at the potential impact of an ombudsman on the consumer's best interests. His paper will be published in the new year, but I can quote from some of the findings that I know it will contain when it is made public. Professor Clarke says that an ombudsman
	"will reduce the problem in supplier/retailer relations whereby the abuse of buyer power in the short run has negative effects in the longer run tending to raise prices to consumers."
	Secondly, it
	"will reduce risks to suppliers enabling them to invest for the longer term and provide benefits from new innovation such as better quality products and more product variety."
	Thirdly:
	"The costs of this policy as envisaged by the CC"—
	the Competition Commission—
	"are likely to be very small while failure to introduce an Ombudsman is likely to lead to a significant weakening of the policy."
	On such a failure, he adds:
	"In turn, this is likely to mean further investigations will be needed in the future. The introduction of an Ombudsman is likely to provide significant consumer benefits and be, arguably, in the interests of the supermarkets themselves."
	I shall come on to that point later.
	The evidence provided by the Sainsbury group is not necessarily fair from the point of view of the supermarkets either. Although the cross-cutting group has some quibbles about the CC's draft proposals, the code should apply to all transformative stages through the supply chain, not to the last supplier to the supermarkets. There are various issues and reasons to do with that, but I will not go into them now. There is also a weakening of the supply code as drafted, a number of elements of which involve what we describe as the "unless" clauses—the conditional reasons why the code would not apply. We think that that results in a weakening of the supply code. There is also a need for a greater emphasis on proactivity within the role of the ombudsman, because it was clearly shown by the previous inquiries that suppliers do not complain because they fear the consequences of complaining about their primary customer. The most significant consequence is that they lose that customer. There is great concern about that climate of fear, as it was described.
	There are areas of dispute relating to matters of cost and arguments about red tape. The Tesco director of corporate and legal affairs, Lucy Neville-Rolfe, said in April 2008:
	"Tesco considers that introducing a new ombudsman could be bureaucratic and an unnecessary cog in a supply chain which has worked well for consumers. More red tape is likely to stifle innovation and investment and reduce the ability of retailers and suppliers to work together flexibly to deliver the best deals for customers".
	That is not what we would hear if we spoke to suppliers—certainly if we spoke to them quietly and without the climate of fear. If the supermarkets are so concerned, they must explain why they have created red tape for primary producers through the creation both of unofficial rules and regulations for their assured produce and of other mechanisms that constrain the ability of suppliers to innovate. Asda's chief executive, Andy Bond, said in April 2008:
	"The Competition Commission's proposals on the new code and an ombudsman could cost the industry hundreds of millions".
	The worst estimate of the cost of a code is £5 million to £6 million, even if all the costs to the industry—and it would be a cost on industry, not the taxpayer—were automatically transferred to customers, which would work out at about 1.25p per customer. The proposal fails to recognise the benefits for the supermarkets.

Gareth Thomas: If the hon. Gentleman will forgive me, I shall come to exactly that question in due course. Perhaps I may end my comments on the context in which we are having the debate by saying that as long as what the supermarkets are asking is fair, there should be nothing wrong with that. If it is not fair, that is perhaps what the strengthened supermarkets code should be for. I will come to that in more detail.
	As the hon. Gentleman said, the Competition Commission began its work in May 2006, delivering its final report and recommendations on 30 April this year. As he knows, the Government responded on 29 July. The Competition Commission produced an extremely thorough report that raised a series of complex and important issues for the grocery market. We recognise in particular the importance of the grocery sector to consumers, as well as the wider economy. That is why we put considerable time and effort into looking at the report in some detail, giving full consideration to the findings and the recommendations, especially those for the Government.
	The hon. Gentleman will know that the Competition Commission received hundreds of submissions from third parties and held some 80 hearings as a result of the inquiry. I hope he will acknowledge that, in general, the Competition Commission found that the groceries market delivers a good deal for consumers.
	I acknowledge that the Competition Commission identified two principal areas of concern. The first is that some grocery retailers have strong positions in several local markets, which could lead to a poorer retail offer for consumers in those areas. The second, which he touched on, is concerns over the transfer of excessive risk and unexpected costs being passed on to grocery retailers' suppliers through various practices that the Competition Commission believes will have an adverse effect on investment and innovation unless they are addressed.
	Grocery buyer power is of benefit to consumers, as part of the lower supplier prices arising from that buyer power will be passed on to consumers. While the Competition Commission did not find the financial viability of food and drink manufacturers to be under threat, the transfer of excessive risks and unexpected costs could, in its view, lessen the incentive to invest and innovate.